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THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

RIVERSIDE 

GIFT  OF 

Dr.  Gordon  V/atld.ns 


J  ^ 


dixthan  &.  WvitkXm 


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littp://www.arcliive.org/details/elementsofpolitiOOwayliala 


\b1lFliV^58>2L 


THE 


ELEMENTS 


or 


POLITICAL   ECONOMY. 


Mr 


FRANCIS    WAYLAND,  D.D., 

LATE  PRESIDENT  OF  BROWN   UNIVERSITY,  AND  PROFESSOR  OF 
MOKAL  PHILOSOPHY. 


VOSTIKTH    THOUSAND. 


BOSTON: 

GOULD      AND      LINCOLN, 

09    WA8HIH0T0H    8TKCET. 

HEW  TORKt  SHELDON  AND  COMPANY. 

CINCINNATI  I  OEO.  8.  BLANCHARD. 

1864. 


Entered,  according  to  Act  of  OongreiA,  in  the  year  18S7,  by 

FEANC18-.WAYLAND, 

la  the  Clerk'i  Office  of  the  District  Ooart^r  the  Diairkt  of  Bhodfi  Island. 


PREFACE. 


The  following  work  contains,  iif  substance,  the 
L/jctures  on  Politic£il  Economy  which  haVe  been 
delivered,  for  some  yeare  past,  to  the  Senior  Class  in 
Brown  University. 

When  the  Author's  attention  was  first  directed  !o 
the  Science  of  Political  Economy,  he  was  struck 
with  the  simplicity  of  its  principles,  the  extent  of  its 
generalizations,  and  the  readiness  with  which  its 
facts  seemed  capable  of  being  brought  into  natural 
and  methodical  arrangement.  At  the  same  time,  it 
appeared  to  him  that  the  works  on  this  subject,  in 
general  use,  while  they  presented  its  doctrines  truly, 
yet  did  not  present  them  in  such  order  as  would  be 
most  likely  to  render  them  serviceable  either  to  the 
general  student,  or  to  the  practicsd  merchant.  This 
defect,  for  the  sake  of  his  pupils,  he  endeavored  to 
supply.  What  he  thus  at  first  prepeu-ed  for  them,  he 
now  offers  to  the  public.  In  how  far  he  has  suc- 
ceeded, it  must  be  left  for  others  to  decide. 

His  object  has  been  to  write  a  book,  which  any 
one  who  chooses  may  understand.  He  has,  there- 
fore, labored  to  express  the  general  principles  in  the 
plainest  manner  possible,  and  to  illustrate  them  by 
cases  with  which  e^ery  person  is  familiar.     In  doing 


nr  .  PREFACE. 

this,  he  is  aware  that  he  may  at  times  have  become 
chargeable  with  repetition.  Sometimes,  the  same 
case  may  have  been  introduced  a  second  time,  for 
the  sake  of  illustrating  a  different  principle.  At  oth- 
er times,  the  same  fart  m.15'  belong  equally  to  two 
different  divisions  of  the  subject.  In  this  latter  case, 
he  has  introduced  it  the  second  time  instead  of  refer- 
ring the  reader  to  what  has  been  said  before,  lecause 
he  believes  that  readers  rarely  take  the  trouble  to 
make  use  of  a  marginal  reference. 

The  principles  of  Political  Economy  are  so  closely 
analogous  to  those  of  Moral  Philosophy,  that  almost 
every  question  in  the  one,  may  be  argued  on  grounds 
belonging  to  the  other.  He  has  not,  however, 
thought  it  proper,  in  general,  to  intermingle  them, 
but  has  argued  economical  questions  on  merely  eco- 
nominal  grounds.  For  this  reason,  he  has  omitted 
many  considerations  which  are  frequently  introduced 
into  discussions  on  this  subject.  For  instance,  on 
the  question  of  protecting  duties,  it  is  frequently 
urged,  that,  if  a  contract  have  been  made  by  the 
ijovernment  with  the  manufacturer,  that  contract  is 
morally  binding.  This,  it  will  be  perceived,  is  a 
question  of  Ethics,  and  is  simply  the  question, 
whether  men  are  or  are  not  morally  bound  to  fulfil 
their  contracts.  With  this  question.  Political  Econ- 
omy has  nothing  to  do.  Its  only  business  is,  to  de- 
cide whether  a  given  contract  were  or  were  not  wise. 
This  is  the  only  question,  therefore,  treated  of  in  the 
discussion  of  this  subject  in  the  following  work. 

It  may  possibly  be  urged  that  the  Author,  having 
had  no  experience  in  mercantile  business,  should 
have  left  this  subject  to  be  trCc^ted  of,  by  practical 


PREFACE  W 

men.  To  this  he  has  only  to  rtply,  that  priyiciples 
belong  to  all  men  ;  that  there  seemed  very  little 
hope  that  this  subject  would  be  undertaken  by  men 
engaged  in  active  business  ;  and  that  he  could  not 
perceive  why  his  doing,  as  well  Jis  he  was  able,  a 
work  which  seemed  to  be  necessary,  should  prevent 
any  one  else  from  doing  it  as  much  better  as  he 
saw  fit. 

It  has  been  to  the  Author  a  source  of  regret,  that 
the  course  of  discussion  in  the  following  pages,  has 
unavoidably  led  him  over  ground  which  has  fre- 
quently been  the  arena  of  political  controversy.  In 
all  such  cases,  he  has  endeavored  to  state  what 
seemed  to  him  to  be  the  truth,  without  fear,  favor, 
or  affection.  He  is  conscious  to  himself  of  no  bias 
towards  any  party  whatever,  and  he  thinks  that  he 
who  will  read  the  whole  work,  will  be  convinced 
that  he  has  been  influenced  by  none.  While  he 
cherishes  for  his  fellow  citizens,  who  are  engaged  in 
political  warfare,  every  feeling  of  personal  respect, 
he  desires  it  to  be  believed  that  he  entertains  for 
party  itself,  whether  political,  ecclesiastical,  or  social, 
the  opinion  which  "befits  him  as  an  American,  a 
Christian,  and  a  gentleman."  * 

It  having  become  necessary  to  print  a  third  edition 
of  the  Elements  of  Political  Economy,  the  Author 
lias  revised  the  work  with  all  the  attention  of  which 
lie  was  capable.  He  hopes  that  it  will  be  found  that 
he  has  improved  it,  by  omitting  in  a  few  cases  what 
was  superfluous,  by  rendering  more  intelligible  whal 


*  Col.  Hutchinson,  when   speaking  in  the   t3ritish  Parliament,  re' 
■pecting  the  part  which  ho  had  taken  in  th<;  King's  death. 


n  PREFACE. 

was  obscure,  and  by  adding  in  several  places  sucli 
suggestions  as  have  arisen  from  an  observation  of  the 
commercial  condition  of  our  country  within  the  last 
two  or  three  years.  The  Author  also  hopes  that  the 
present  edition  will  appear  in  a  better  dress  and  at  a 
lower  price  than  those  which  have  preceded  it ;  and 
thus  be  more  deserving  of  the  attention  of  those  in- 
Btructors  who  have  used  it  as  a  text-book. 

Bbown  Univehsity,  May  1,  1840. 


PREFACE  TO  THE  FOURTH  EDITION. 

The  demand  for  the  Elements  of  Political  Econo- 
my having  been  such  as  to  induce  the  publishers  to 
stereotype  it,  the  Author  has  given  to  if  a  careful 
revisal.  A  few  paragraphs  have  been  omitted,  a  few 
have  been  added,  and  some  of  its  doctrines  have 
been  slightly  modified.  No  material  alteration  has 
however  been  made.  Grateful  for  the  kindness  with 
which  it  has  been  received,  and  in  the  hope  that  i( 
may  conduce,  in  some  small  degree,  to  facilitate  the 
study  of  the  science  of  which  it  treats,  it  is  agiin 
submitted  to  the  judgment  of  the  public. 

iJRon-N   Univehsitv,  OctoDer  1,  lrf4i. 


CONTENTS 

AND 

PLAN    OF    THE   WORK. 


INTRODUCTION. 

DEFINITIONS,  AND  DIVISION  OF  THE  SUBJECT. 

Pago 

Politisal  Economy,  Wealth,     ....  lb 

Value,  Intrinsic,     ......  16 

"      Exchangeable,              .            .            .            .            .  m 

Cost,            .......  24 

Production,        .......  2<1 

Exchange,  ........  25 

Distribution,      .......  26 

Consumption,         .......  26 


BOOK    FIRST. 

OF  PRODUCTION. 

CHAPTER   FIRST. 

OF  CAPITAL 
The  Nature  of  Capital,       ......      30 

The  Forms  of  Capital,               .             .                         .             .  30 

The  Changes  which  Capital  undergoes,  .             .             .  .31 

The  lncreaw»  of  Capital,           .....  33 

Proouctive  ana  unproductive  Capital,       ...  35 

Fixed  and  circulating  Capital,              .             .             .             .  J6 

Money,       .......  41 

CHAPTER   SECOND. 

ftp  INDUSTRY". 

PART   I. 

THE  OBTECTS  AND  FORMS  OF  HUMAN  INDUSTRY. 

SECTION  I. 

7^1  DiFFSRiNT  OajBcra  op  Homan  iNoornir. 

tJhanjre  of  Elementary  form,  ....  43 

Change  of  Aggregate  form,      ....  44 

"  "  Place,    ......  44 

Ooneral  Concluaioni,   .....  46 


till 


CONTENTS. 


SECTION  il 

Ths  difpbrbnt  Forms  of  Human  iMoosmr 

Industry  of  Discovery,       .....  50 

"          "  Invention,               .....  5(J 

Operative  Induj'r;/,            ....  .52 

Of  tlie  Productd  ot' these  various  forms  of  Human  ibuUkcry  54 

The  Product  of  the  Operative  Laborer,     .            .            .  .54 

"        "         Discoverer,            ...   -  55 


PART  II. 

THE  MODES  BY  WHICH  THE  PRODUCTrVENESS  OF  HUMAN  INUUSTRi 
MAY  BE  INCREASED. 


SECTION  I. 

Trb  van  OF  Natuiux.  Aqbmts. 

Of  Natural  Agents, 

Of  Tools  and  Machines, 

Of  Natural  Agents  wliich  create  Momentum. 

Of  Animate  Agents,     .... 

Of  Inanimate  Agents, 

Gunpowder,      ..... 

Wind, 

Gravitating  power  of  Water,   .  .   •         . 

Steam,  .... 

The  advantages  of  Inanimate  over  Animate  Agents, 
Of  the  Natural  Agents  by  which  Momentum  is  applied, 
Uses  of  these  Agents,  ..... 

SECTION  II. 
Op  Division  op  Labor. 
Prmciples  on  which  the  utility  of  Division  of  Labor  depends. 


GO 
60 
60 
62 
62 
64 
65 
66 
67 
68 
70 
72 


SECTION  III. 
Limitations  to  thb  Division  of  Labob. 


From  the  Nature  of  the  Process, 

From  other  Causes, 

Capital, 

Demand, 

Of  National  Division  of  Labor, 


83 
83 
83 
85 
98 


SECTION  IV. 

Efvbcts  of  tbb  imcrbasbd  proddctivsnbss  op  Human  Inddstbt. 

^.     Effect  upon  Producers,            .            .            .            .            .  W 

Immediate,        .......  f)7 

Ultimate,    ........  99 

'I.     Efifect  upon  Ccasuaiers,             .            .            .          -.  10.'^ 


CONTENTS.  IX 


CHAPTER   THIRD. 

OF  Tlli   LAWS  WHICH  GOVERN  THE  APPLICATION   OF  LABOR  TO 
CAPITAL. 

SECTION  I. 
Tai  Conditions  of  oott  Bbino,  on  which  thb  Laws  on  this  Sobjict 

ABB   POUNDBO,  ......  10>l 

SECTION  II. 

rNDUSTSl     WILL    BB  APPLIED    TO    CAPITAL,  AS    BVBRT  MaM  BHJOrB  TBB 
ADVANTAOBS  OF   BIS   LabOB  AND  CAPITAL. 

As  every  man  may  gain  all  he  can,  .  .  109 

As  every  man  may  use  his  own  as  he  will,  .  .  .  109 

SECTION  III. 
Labor  will  bb  appubd  to  Capital,  as  bvbbt  Mam  Bupnats  trb  uioon- 

VBNIBNCBS   op   IDLENESS,  .  .  .  *  .118 

Poor  Laws,      .....  .  120 

SECTION  IV. 
Tbb  grbater  THB  Ratio  of  Capital  to  Labor,  tbi  orbatbr  wax  bb 

THB  StiMOLOB  to   LaBOR,  ....  V'&t 

SECTION  V. 

(WDUBTRr  WILL  BB    APPUBD  TO  CAPITAL,    IN    PROPORTION  TO    TBI    InTBLLBO- 

toal  CoNDmoN  OF  A  Pboplb,    •  .  •  •  1^ 

SECTION  VI. 

Of  thb  Bppbctb  of  dirbct  Lboislation,  as  a  mbanb  of  oicrbasino 

Proddctioii. 

Production,      ....  .  .  I'U 

Of  Protecting  Duties,       ...  .  .       135 

Of  Bounties,    .  .....  140 

Objections  Considered,     .  .  .  .  .  .       1 10 


BOOK    SECOND 

EXCHANGE. 

CHAPTER   FIRST. 

HAKTER,  «3r    KXCriA.'vuE  IN   KIND. 

SECTION  i. 
Op  nta  PRiNriP'.Bs  'N  OUR  Constitution  which  oivb  rmb  in  Exchanor,    l-'l 


%  CONTENTS. 

SECTION  11. 

General  Doctrines  op  Exohamob. 

or  the  exchangeable  value  of  Products,              .  •      165 

Exchange  confers  no  new  value,        .             .  1(39 

Conditions  on  which  frequency  of  Exchange  depends,  .      179 

Stagnation  of  Business,           .             .             .             •  I7t) 

Eifecte  of  legislative  enactments  on  Exchange,              .  .       IKI 

Internal  Improvements,          ....  183 

CHAPTER   SECOND. 

EXCHANUbi  BY  MEANS  OF  A  METALLIC  CURRENCY. 

SECTION  1. 

Dr  THE  Use  of  a  Cibcdlatino  Mboiuh,         .  ■  •  lS8 

SECTION  II. 

Up  the  Q0AUTIB8  NECESSARY  TO  THAT  WHICH    COMSITrUTBa  A    ClROOIJlTINa 

Mbdiuii,  .  •  .  .1115 

SECTION  HI. 
Of  thb  Functions  of  Monet,  .....      200 

SECTION  IV. 
Of  THE  AoBNcr  of  Governmbnt,  in  bbspsct  TO  A  CiRcnLATiNO  Meoiov,   216 

CHAPTER   THIRD. 

OF  A  CIRCULATION  BY  MEANS  OF  A  PAPER  CURRENCY. 

SECTION  I. 

Of  the  Nature  op  Banks  in  Ghnzru. 

Banks  of  Deposit  and  Exchange,  ....  234 

Banks  of  Discount,  or  Loan,  ....  2^i2 

LSanks  of  Circulation,  or  Issue,    ....  235 

Of  the  Sources  of  the  Profit  of  Banks,  .  .  241 

SECTION  II. 

OinaVTajxT  OF  Eakkm. 

As  Institutions  of  Deposit,  ....  242 

"  ♦'    Loan,  ....  245 

«         "    Circulation,    ....  259 

SECTION  \\l. 

\OTAllTAan  AND  DlSADVANTAOES  OP  A  PapBR  CIRCULATION,      .  .         261 

SECTION  IV. 
\hr  ma  AoENOT  op  Society,  that  is,  op  Uoverniient,   in  tieapHCi  iu  a 

Paper  Circulation,      •  .  .  .  .  277 


CONTENTS.  XI 

BOOK    THTRD. 

OF  DISTRIBUTION. 

CHAPTER  FIRST. 

WAGES,  OR  THE  PRICE  OF  LABOR. 

SECTION  I. 
Thr  Gbneral  Princiflks  of  WAOia 

CM  Simple  Labor,  .  .  .  .  .  2!n 

Of  Educated  Labor,   .  .  ...  391 

Ol  the  supply  of  Simple  Labor,   .....  298 

Of  the  demand  for  Simple  Labor,      .  ,  .  .  a!»9 

Population  and  Wages,    .  ...  301 

Labor  in  the  Fine  Arts,  ...  .309 

SECTION  IL 

Or  TBI   SpBCIAI.  ClRCnMSTANCBR    BT  WHICH,   IRRBSPECTIVBLT    09    CAPITAL, 

TRB  WAOBS  OP  LABOR  ARB  AFFBCTBD,      .  .  .  .310 

CHAPTER   SECOND. 

THE  PRICE  OF  MONEY,  OR  INTEREST. 

SECTION  L 

Up  thb  BBMEprr  op  Capital  to  tbb  Laborbr,  •  .  .315 

SECTION  II. 

Op  Risk  and  CoirvEinBNCB  op  Intbstmbht. 

Of  Risk, •  .  .      319 

Of  Convenience  of  InTestment,        .  .  .  323 

SECTION  III. 
Op  thb  Ratb  op  Tntbrbst,  as  appbgtbo  bt  tdb  vsi  of  Captial. 

By  the  average  profit  of  Capital,  ....  3!M 

"  KaUo  between  Supply  and  Demand,       .  .  .  325 

"■  Ft  ctfJom  of  Capital,    ..*...  328 

»    Taxation,  .  .  .  .  .  .  .     .  329 

•'  Usury  I^ws,  .......  399 

Ut  atxku,      .  334 

CHAPTER  THIRD. 

OF  THE  PRICE  OF  LAND,  OR  RENT. 

Price  of  Land,  or  Rent,    ......  330 

Mines,  .......  352 

intercstof  Real  EsUte,    ......  3M 

Extent  of  Busineaa  .....  3f>7 

(naurance,  .  ...  359 


Ul  CONTENTS. 

BOOK    FOURTH. 

OF  CONSUMPTION. 

CHAPTER  FIRST. 

OF  THE  NATURE  AND  DESIGN  OF  CONSUMPITON. 

Nature  of  Consumption,  ....      3&i 

Design  of  Consumption,  ....  SCf 

CHAPTER  SECOND. 

OF  INDIVIDUAL  CONSUMPTION. 

SECTION  I. 

Of  Individual  Comsdmftiom,  for  thb  bakb  of  Ra-PRODncnoM. 

Of  Consumption  of  Capital,        .....      370 
Of  Consumption  of  Labor.      .  .      '      .  .  .  373 

SECTION  II. 

Of  Consumption  for  thb  Gratification  of  Dbsirb. 

Of  Consumption  for  the  purpose  of  self-gratification,  simply,  379 

Consumption  in  respect  to  the  relative  Objects  of  Desire,   .  382 

CHAPTER  THIRD. 

OF  PUBLIC  CONSUMPTION. 

SECTION  I. 

Of  Taxes,  or  tbb  mannbr  in  which   thb  Pubuo  Expenditure  is  pbotidkd 

for. 

Of  direct  and  indirect  Taxation,  .  .  ...      391 

Of  the  Principle  by  which  Taxation  should  be  regulated,    .  395 

SECTION  II. 

Of  the  purposes   for  which  thb  Pubuc  Rbvenub  is  coMMOior  Expknceo. 

Of  the  Expenses  of  Civil  Government,  .            .  398 

Expenses  for  Public  Education,        .            .  .                         399 

"            "   Maintaining  Religious  Worship,  .            .      403 

•♦            "   National  Improvement,           .  404 

**           "   PauperVm              .            .  .405 

«            •«   War.     ■            .            .            .  406 


ELEMENTS 


or 

• 


POLITICAL  ECONOMY. 


.POLITICAL  ECONOMY. 

INTRODUCTION. 

DEFINITIONS,  AND  DIVISION  OF  THE   SUBJECT. 

1.  Political  Economy  is  the  Science  of  fVealth. 
ft  IS  sometimes  defined  the  Science  of  National  Wealth. 
This  definition  seems  not,  however,  sufficiently  compre- 
hensive ;  inasmuch  as,  the  laws  which  govern  the  crea- 
tion of  weahh  are  essentially  the  same,  whether  they 
are  considered  in  respett  to  man  as  an  individual,  or  to 
man  as  a  society. 

By  Science,  as  the  word  is  here  used,  we  mean  a 
systematic  arrangement  of  the  laws  which  God  has  es- 
tablished, so  far  as  they  have  been  discovered,  of  any 
department  of  human  knowledge.  It  is  obvious,  upon 
the  slightest  reflection,  that  the  Creator  has  subjected 
the  accumulation  of  the  blessings  of  this  life  to  some 
determinate  laws.  Every  one,  for  instance,  knows  that 
no  man  can  grow  rich,  without  industry  and  frugality. 
Political  Economy,  therefore,  is  a  systematic  ananee- 
ment  of  the  laws  by  which,  under  our  present  constitu- 
tion, the  relations  of  man,  whether  individual  or  social, 
lo  the  objects  of  his  desire,  are  governed. 

2.  fVealth.  It  has  been  frequently  remarked,  that 
the  universe  around  us  is  composed  of  objects  suited  to 
gratify  our  desire,  and  thus  minister  to  our  happiness. 
The  capacity  to  gratify  desire,  is,  therefore,  the  first 
element  that  enters  into  our  notion  of  wealth.     But  as 


16  OF    VALUE. 

the  gratification  of  our  desires,  by  means  of  au  external 
object,  almost  always  supposes  s  me  change  efl'ecteo 
in  that  object ;  and,  as  we  could  have  no  right  to  effeci 
that  change,  unless  that  object  were  our  own,  another 
element,  which  enters  into  the  notion  of  wealth,  is  tht 
idea  of  possession.  Hence,  wealth  may  be  defined  any 
nbiect,  having  the  power  of  gratifying  human  desire, 
which  is  capable  ol  beuig  appropriated.  He  who  pos- 
sesses many  of  these  objects  in  abundance,  is  termed 
rich.  He  who  possesses  few  of  them,  is  termed  poor. 
He  who  possesses  a  large  amount  of  money,  is  also 
called  rich  ;  because,  with  money,  he  can  generally 
procure  whatever  else  of  physical  convenience  he  may 
desire. 

3.  Of  value,  intrinsic  and  exchangeable.  The  par- 
ticular quality  in  any  substance,  which  renders  it  capable 
of  gratifying  human  desire,  is  called  its  valtie.  Thus, 
that  quality  of  fuel,  which  constitutes  its  value,  is  its 
power  of  generating  heat,  or  of  gratifying  this  desire  in 
man.  A  particular  substance  may  have  the  power  of 
gratifying  either  one  or  several  desires,  and  thus  it  may 
have  either  one  or  several  values:  Thus  antliracite  coal 
is  at  present  known  to  have  but  one  value,  namely,  that 
of  generating  heat.  Bituminous  coal  possesses  also  an- 
other, as  it  is  also  used  in  the  manufacture  of  gas  for 
the  purposes  of  illumination.  Wood  has  several  values, 
•nasmuch  as,  besides  being  used  for  fuel,  it  may  also  be 
used  for  building,  and  for  various  purposes  in  the  aits. 
Iron  has  as  many  forms  of  value,  as  there  are  uses  to 
which  it  may  be  appUed,  in  promoting  the  convenience 
of  man 

The  degree  of  the  intrinsic  value  of  any  substance, 
depends  upon  the  nature  and  the  number  of  the  desires 
which  it  can  gratify.  If  the  gratification  of  that  desiie 
to  which  it  is  subservient,  be  necessary  to  the  existence 
or  to  the  comfort  of  man,  its  value  will  be  great.  Such 
is  the  case  whh  air,  water,  clothing,  food,  and  fuel.  If 
the  gratification  which  it  affords  can  be  easily  dispensed 
with,  its  value  will  be  small.  Such  is  the  case  with  ar- 
♦icles  of  luxury,  or  the   means    of  mere   amusement- 


OF    VALUE.  I? 

The  inferiority  of  the  value  of  this  lattc  class,  is  evi- 
dent from  the  fact,  that,  in  seasons  of  scarcity,  these  are 
first  relinquished.  And  again,  the  degree  of  the  value 
of  any  substance,  depends  upon  the  number  of  desires 
which  it  can  gratify.  India  Rubber,  or  Caoutchouc,  a 
few  years  since,  was  used  but  for  one  purpose,  that  of 
rubbing  out  pencil  marks  It  is  now  used  in  the  manu- 
facture of  shoes,  and  for  several  other  very  important 
purposes.  The  intensity  of  its  value  is,  therefore, 
greatly  increased. 

We  have  thus  far  treated  only  of  intrinsic  value,  or 
of  the  power  which  any  particular  substance  possesses, 
of  gratifying  human  desire. 

If,  however,  we  examine  the  various  articles  of  value 
around  us,  we  shall  observe  a  very  remarkable  difference 
between  them.  Some  of  them  may  be  made  the  means 
of  procuring  for  us,  by  exchange^  other  objects  of  desire. 
Such,  for  instance,  are  gold,  silver,  iron,  coal,  wood,  &c. 
He  who  possesses  a  large  quantity  of  either  of  these, 
may,  ordinarily.,  procure  for  himself,  by  exchange,  any 
tiling  else  that  he  needs.  Others,  on  the  contrary,  and 
those  of  great  intrinsic  value,  are  destitute  of  this  prop- 
erty. What  has  greater  intrinsic  value  than  air,  the 
light  of  the  sun,  or  water  .''  Yet  we  can  get  nothing  in 
exchange  for  air  or  sun-light,  and  very  rarely  for  water. 
And  again  ;  substances  having  an  exchangeable  value, 
do  not  possess  that  value,  in  proportion  to  their  intrinsic 
value.  Iron  has  a  far  greater  intrinsic  value  than  gold  ; 
yet,  an  ounce  of  gold  has  a  far  greater  exchangeable  value 
than  an  ounce  of  iron  ;  that  is,  an  ounce  of  gold  will 
procure  for  us  many  more  articles  of  convenience,  in 
exchange.  This  latter  property,  or  the  power  of  pro- 
curing for  us  something  else  in  exchange,  is  called  (x- 
cliangeable  value. 

If,  now,  we  compare  those  substances  which  havH 
not,  with  those  which  have  exchangeable  value,  we  shall 
fiiid  them  to  differ  in  the  following  res|)ects  r 

I.  Those  which  have  no  exchangeable  value,  are 
every  where  abundant  and  inexhaustible.  The  supply 
of  the  others  is  limited  in  quantity  or  is  limited  in  place. 
2* 


18  OF    KXCIIANGKABLE    VALUL. 

Air,  and  the  light  of  the  sun,  are  inexhaustible  e\'?ry 
where.  Coal 'is  in  some  places  inexhaustible,  but  ii  is 
not  so  in  others.  Where  it  lies,  for  miles  together,  im- 
mediately upon  the  surface,  and  in  beds  of  unknown 
thickness,  it  has  no  exchangeable  value.  Where  it 
must  be  carried  to  any  distance,  to  be  brought  to  the 
consumer,  it  then  acquires  an  exchangeable  value. 

2.  The  value  of  the  first  class  of  substances  has  nf- 
(eived  no  addition  from  human  labor ^  but  derives  what- 
ever quahties  it  possesses,  directly  from  the  gift  of  God. 
The  value  of  the  other,  has  always  received  some  addi- 
tion, and,  frequently,  it  is  derived  altogether  from  hum;ui 
labor.  Neither  air,  nor  the  light  of  the  sun,  can  receive 
any  additional  power  of  gratifying  human  desire,  from 
any  effort  of  man.  On  the  contrary,  all  the  most  im- 
portant values  of  iron,  are  derived  from  human  skill. 
A  lump  of  iron  ore  is  as  valueless  as  granite  or  sand- 
stone. The  peculiar  properties  of  the  metal,  are  the 
result  of  the  processes  through  which  it  passes.  When, 
however,  a  substance  which  ordinarily  possesses  only 
intrinsic  value,  is  placed  under  such  circumstances  tliai 
human  labor  must  be  added  to  it  in  order  to  enable  it 
to  gratify  desire,  it  then  acquires  exchangeable  valno. 
Thus  water,  which  ordinarily,  has  no  exchangeable 
value,  is  frequently  sold  by  the  gallon  in  cities,  because 
it  can  be  procured  in  purity  oaly  from  a  distance,  and 
hence,  before  it  can  gratify  the  desire  of  particular  indi- 
viduals, it  requires  the  labor  of  transportation  to  be 
added  to  it. 

We  see,  then,  that  every  substance  on  earth  ma) 
have,  and,  doubtless,  it  actually  has,  intrinsic  value,  if 
we  then  consider  all  those  qualities  which  are  necessary 
to  prepare  a  substance  for  the  gratification  of  human 
desire  to  be  intrinsic  values,  these  may  be  divided  into 
two  kinds  ;  first,  those  which  are  imparted  to  the  sub- 
stance by  the  immediate  act  of  God  ;  and,  secondly, 
those  that  are  imparted  to  it  through  the  intermediate 
agency  of  man.  The  former,  being  the  gift  of  God, 
are  gratuitously  received,  and  gratuitously  parted  with. 
The  latter  have  cost  human  labor,  and  therefore  cannot 


OF    EXCHAx>GEABLE    VALUE.  10 

be  obtained  without  an  equivalent.  Hence  it  is  the 
latter  alone,  that  enter  into  computation,  in  fixing  ex- 
changeable value.  Thus  the  exchangeable  value  of  iron 
and  of  gold,  respectively,  does  not  depend  upon  the 
uses"  to  which  these  metals  may  be  put,  but  upon  the 
labor  which,  must  be  employed  in  preparing  them  to 
gratify  desire. 

But  it  is  plain,  that  if  a  man  expend  labor  in  the 
creation  of  a  value,  this  labor  gives  him  a  right  to  the 
exclusive  possession  of  that  value  ;  that  is,  supposing 
the  original  elements  belonged  to  no  one  else.  Now,  as 
almost  all  the  qualities  which  gratify  human  desire,  can 
exist  only  by  the  exertion  of  this  labor,  it  follows,  that 
all  such  objects  must  have  already  become  the  exclu- 
sive possession  of  some  human  being.  Hence,  he  who 
wishes  to  possess  such  objects,  must  either  himself  ex- 
pend the  labor  necessary  for  producing  them,  or  else  he 
must  procure  them  by  voluntary  concession,  from  some 
one  who  has  already  expended  it.  But  he  who  has  ex- 
pended labor  upon  a  substance,  will  never  voluntarily 
Surrender  it  up,  either  for  nothing,  or  for  that  which  he 
can  obtain  without  labor.  He  who  makes  knives,  will 
neither  give  them  away,  nor  exchange  them  for  air,  or 
water,  or  sun-light.  Hence,  he  who  wants  knives  must 
either  make  them  himself,  or  else  he  must  offer  the 
knife-maker,  in  exchange  for  them,  some  value  which  he 
himself  has  created.  Hence,  every  man  who  desires 
the  means  of  happiness,  must  labor  to  obtain  them. 
And,  as  every  man  has  his  preference  for  some  particu- 
lar kind  of  labor  ;  and  as,  moreover,  every  man  can 
succeed  better  by  confining  his  labor  to  one  thing,  than 
by  devoting  it  to  twenty  things,  every  man  is  desirous 
of  exchanging  some  portion  of  the  value  created  by 
himself,  for  that  created  by  others.  So  soon  as  this  is 
the  case  with  any  one  substance,  it  then  has  acquired 
exchangeable  value  :  that  is,  just  so  soon  as  other  men 
are  willing  to  give  me  a  value  which  they  have  cheated, 
for  that  which  I  have  created,  then  the  result  of  my  la- 
bor has  exchangeable  value,  and  not  before. 

The  degree  of  the  exchangeable  value  of  arv  omp 


20  OF    EXCHANGEABLE    VALUE. 

substance,  depends  chiefly  upon  the  amount  of  labor  and 
of  skill  necessary  to  create  that  value.  No  one  would 
exchange  what  has  cost  him  two  days'  labor,  for  that 
which  has  cost  another  man  of  the  same  skill,  but  one 
day's  labor  ;  because,  rather  than  make  such  an  ex- 
change, he  would  create  this  second  value  for  himself. 
Thus,  if  a  hundred  pounds  of  fish  could  be  procured  by 
a  day's  labor,  and  only  twenty-five  pounds  of  venison  , 
men  would  exchange,  not  pound  for  pound,  but  labor  for 
labor  :  that  is,  at  the  rate  of  four  pounds  of  fish  for  one 
pound  of  venison.  The  amount  of  labor  expended  in 
the  creation  of  a  value,  is  commonly  denominated  its 
cost.  This  is  always  the  standard  by  which,  for  long 
periods,  the  degree  of  exchangeable  value  may  be  esti- 
mated. 

When,  however,  we  here  speak  of  labor,  we  speak 
of  it  as  simple  labor  ;  that  is,  without  taking  into  con- 
sideration the  degree  of  skill  which  may  be  combined 
with  it,  or  the  other  circumstances  which  may  conspire 
to  create  variation  in  its  value.  These  are  to  be  con- 
sidered hereafter.  We  suppose,  in  the  remarks  above, 
that,  in  all  cases,  labor  of  the  same  kind  is  to  be  com- 
pared together. 

1  have  said  above,  that  cost  forms  the  standard  by 
which  the  degree  of  exchangeable  value  for  long  periods 
is  to  be  estimated.  Temporary  circumstances  may  cre- 
ate a  variation  from  this  standard  ;  and  may,  for  a  short 
time,  elevate  this  value  above,  or  depress  it  below,  the 
cost.  These,  however,  can  continue  to  operate  but  for 
a  shoit  period  ;  the  tendency  of  exchangeable  value  is 
always  to  gravitate  towards  cost.  The  causes  of  ihia 
variation,  we  will  now  briefly  illustrate  : 

1 .  Suppose,  that  by  the  use  of  better  tools,  or  from 
any  other  cause,  the  supply  of  fish  became  more  abun- 
dant, so  that  a  man  could,  by  one  day's  labor,  procure 
two  hundred  instead  of  one  hundred  pounds.  The 
hunter  would  not  then  be  wiUing  to  exchange  as  before, 
since  he  would  now  rather  catch  fish  for  himself.  He 
would  demand  eight  pounds  of  fish  for  one  pound  of  veni- 
son :  that  is,  the  exchangeable  value  of  fish  would  fall ;  or. 


OF    EXCHANGEABLE    VALUE.  31 

in  Other  words,  it  could  not  procure  as  much  venison  in 
exchange  as  it  did  before.  But  as,  m  consequence  of 
this  reduction  in  price,  there  would  be  an  increased  de- 
mand for  fish  ,  that  is,  more  persons  would  want  it,  and 
thej  would  also  want  a  larger  quantity  than  before,  the 
fisherman  would  not  be  obliged  to  exchange  at  half  the 
former  rate,  but  would  be  able  to  exchange  at  a  rale 
somewhat  above  it ;  say,  perhaps,  six  or  seven  pounds 
for  a  pound  of  venison.  Thus,  both  parties  would  be 
gaijiers.  The  fisherman  would  procure  more  venison  ; 
die  hunter  more  fish,  by  a  day's  labor.  Thus,  a  benefit 
to  one,  is  a  benefit  to  all.  And  thus  we  see,  that,  other 
things  being  equal,  the  greater  the  supply  of  any  article, 
the  less  is  its  exchangeable  value  ;  that  is,  the  less 
amount  of  other  things,  can  it  procure  in  exchange. 

2.  Supposing  the  labor  necessary  for  taking  fish  to  be 
doubled  ;  so  tliat,  by  the  labor  of  a  day,  no  more  than 
fifty  pounds  could  be  procured.      The  fisherman,  then, 
would  not   sell,  as  at   first,  four  pounds  of  fish  for  one 
pound  of  venison  ;    he  would   rather   hunt   venison   for 
himself.     He  would  offer  but  two  pounds  of  fish  for  a 
pound  of  venison.     But  as,  at  this  rate,  the  number  of 
his   customers   would   be   greatly  diminished ;    and   as 
every  person  would  use  less  fish  than  before,  he  would 
find  it  difficult  thus  to  dispose  of  the  results  of  his  labor, 
and  would  be  obliged  to  offer  it  on  more  favorable  terms 
say  two  and  a  half,  or  three  pounds,  for  a  pound  of  veni 
son  ;  thus,  with  a  day's  labor,  he  would  procure  les' 
venison,  and   the   hunter   less  fish.     That  is,  the  evi 
would  be  shared  between  them  ;  and  thus,  an  injury  t< 
one,  is  an  injury  to  all.     Thus,  other  things  being  equal 
ihe    less   the  supply.,  the  greater  is    the    exchangeabl- 
value. 

3.  Suppose  the  labor  necessary  for  procuring  fish 
leniain  the  same,  but  that,  from  some  cause,  twice  a» 
many  persons  desired  fish  as  before.  Suppose  tliai 
every  person  desired  five  pounds,  but  that  there  was 
only  enough  to  supply  half  the  population  with  this 
quantity.  Then  there  would  arise  a  competition  among 
»be  buyers,  and  he  who  obtained  this  quantity  must  ob- 


22  OF    EXCHWGEABLE    VALUE. 

lain  il  by  overbidding  his  neignoor.  Thus,  fish  would 
command  a  larger  amount  of  venison  in  exchange  than 
before  ;  that  is,  the  exchangeable  value  of  fish  would 
rise;,  and  it  would  continue  at  this  point,  until  the  demand 
decreased,  or,  until  a  sufficient  number  of  men  devoted 
themselves  to  fishing,  to  furnish  enough  to  reduce  it  to 
its  mean  exchangeable  value.  Thus,  the  greater  the 
demand,  the  greater  the  exchangeable  value. 

4.  Suppose,  that,  while  the  labor  of  taking  fish  con- 
tinued as  before,  the  number  of  purchasers  was  from 
any  cause  diminished,  so  that,  while  there  was  fish 
enough  caught  to  supply  every  person  with  five  pounds, 
only  half  the  population  wanted  any.  In  this  case,  as  a 
large  residue  would,  at  the  close  of  every  day,  be  left  on 
the  fisherman's  hands,  there  would  be  a  competition 
among  the  sellers  ;  and  each  one  would  be  desirous  of 
disposing  of  his  stock  at  a  diminished  price,  rather  than 
lose  It  altogether.  Hence,  he  would  offer  to  exchange 
it  for  a  less  amount  of  venison  than  before  ;  that  is,  the 
exchangeable  value  of  fish  would  fall.  It  would  remain 
at  this  point,  until  either  the  demand  arose  to  its  natural 
rate  ;  or  a  sufficient  number  of  persons  turned  their  at- 
tention to  some  other  occupation,  to  reduce  the  supply 
to  a  level  with  the  demand.  That  is,  the  supply  being 
the  same,  the  less  the  demand,  the  less  the  exchangeable 
value 

It  is  the  operation  of  these  principles  that  keeps  the 
supply  of  any  article  throughout  the  world  always  equal 
to  tlie  demand  ;  and,  it  is  surprising  to  observe,  with 
what  accuracy  this  effect  is  produced.  In  the  largest 
cities,  there  is  always  just  enough  butcher's  meat  and 
vegetables,  and  clothing,  to  supply  the  wants  of  the  in- 
habitants, and  no  more.  The  moment  the  price  of  an 
article  falls  below  cost,  it  ceases  to  be  produced,  unlil 
the  price  rises.  As  soon  as  it  rises  above  ordinary 
profit,  capital  and  labor  are  directed  to  it,  and  it  is  pro- 
duced in  sufficient  quantity  to  meet  the  unusual  demand. 
Thus,  also,  we  see  why  the  high  price  of  any  article  ia 
commonly  followed  by  a  low  price  of  the  same  article, 
and  the  contrary.     When   the  price  of  any  article  is 


OF    EXCHANGEABLE    VALUE.  23 

low,  men  leave  off  iliis  kind  of  production  i.)  loo  greal 
numbers,  and  hence  follows  a  comparative  scarcity  of 
the  product  which  they  furnish.  When  the  price  is 
high,  men  rush,  in  too  great  numbers,  into  this  sort  of 
production,  and  hence  arises  a  temporary  glut,  and  a 
depreciation  of  its  exchangeable  value. 

Again  :  it  will  be  seen  that  this  variation  in  the  ex- 
changeable value  of  any  article,  is  dependent  greatly  on 
its  perishableness.  An  article  which  is  not  Hable  to  be 
destroyed  by  keeping,  will  neither  fall  so  rapidly,  nor  so 
low,  by  either  a  diminution  of  demand,  or  an  increase 
of  supply,  as  one  which  is,  in  its  nature,  rapidly  perish- 
able. Thus,  iron  may  be  kept  for  years,  without  decay ; 
and  hence,  its  exchangeable  value  cannot  greatly  vary, 
in  consequence  of  increase  of  supply  or  decrease  of  de- 
mand :  that  is,  it  is  an  article  not  liable  to  great  or  sud- 
den fluctuation.  On  the  contrary,  fish,  fruits,  and  ar- 
ticles of  this  nature,  very  often,  in  the  course  of  a  few 
days,  vary  one  or  two  hundred  per  cent. 

Another  source  of  variation  in  the  exchangeable  value 
of  products,  is  the  time  necessary  for  their  production. 
When  any  amount  of  a  commodity  may  be  quickly  pro- 
duced, its  rise  of  price  will  not  keep  pace  with  the  in- 
creased demand  ;  because,  every  one  will  know  that,  by 
waiting,  he  can  be  provided  with  it  at  a  reasonable  price. 
Thus,  a  small  rise  of  price  in  a  manufactured  article, 
when  tlie  material  is  abundant,  will  cause  the  quantity 
produced  to  be  greatly  increased  ;  hence,  the  rise  is 
never  excessive.  But  when  a  long  time  is  necessary 
for  the  production  of  an  article,  and  it  is  an  article  of 
prime  necessity,  the  rise  of  price  is  frequently  great. 

And  again  :  It  will  be  seen,  that,  so  far  as  the  seller 
and  the  buyer  are  concerned,  these  variations  balance 
nach  other.  When  products  rise  on  the  merchant's 
hands,  he  charges  an  additional  price ;  when  they  fall, 
he  is  obliged,  frequently,  to  sell  at  a  reduced  profit,  or 
even  to  sell  below  cost.  The  gain,  in  one  case,  makes 
up  for  the  loss  in  the  other.  Hence,  as  no  one  sympa- 
thizes with  the  merchant,  when  he  sells  at  a  loss,  no  one 
should  complain,  when  he  sells,  for  a  short  time,  at  more 
tiian  an  ordinary  gain- 


24  OF    EXCHANGEABLE    VALUE. 

If,  now,  we  sum  up  what  has  been  said,  we  shall  (ome 
to  the  following  general  conclusions  : 

1.  Cost;  that  is,  labor  bestowed,  is  the  foundation 
of  exchangeable  value,  and  from  this,  it  can  never,  for 
long  periods,  materially  vary  :  that  is,  an  article  can  al- 
ways be  had  for  what  it  costs  to  produce  it ;  including 
in  this,  the  ordinary  profit  to  the,  producer.  Notwith- 
standing this,  there  will,  however,  arise  various  fluctua- 
tions, depending  upon  the  following  circumstances  : 

Other  things,  then,  being  equal  — 

2.  The  greater  the  supply,  the  less  the  ex(;hangeable 
value. 

3.  The  less  the  supply,  the  greater  the  exchange- 
able value. 

4.  The  greater  the  demand,  the  greater  the  ex- 
changeable value. 

5.  The  less  the  demand,  the  less  tbe  exchangeable 
value. 

6.  And,  in  general,  cost  being  fixed,  exchangeabh 
value  is  inversely  as  the  supply,  and  directly  as  the  de 
mand. 

7.  Or,  still  more  generally,  at  any  particular  time 
exchangeable  value  will  be  as  the  eost,  pliis  the  effec 
produced  by  the  variation  in  supply  and  demand. 

Hence,  wealth  consists  of  all  objects  which  have  a 
exchangeable  value. 

Exchangeable  value  is  slightly  distinguishable  fron 
price.  The  first,  is  the  power  which  any  object  pos- 
sesses of  procuring  for  us  any  object  whatever.  Th* 
second,  price,  is  the  power  that  it  has  to  procure  for  u> 
one  particular  object ;  that  is,  money. 

Of  Production.  From  what  has  been  said,  it  is  easj 
to  explain  ihe  nature  of  Production.  It  is  the  act  bj 
which  we  confer  a  particular  value  upon  any  cbjeci 
whatever,  or  by  which  we  give  to  any  object  its  adapt- 
edness  to  gratify  desire.  We  can  neither  create  noi 
annihilate  any  thing.  All  that  we  can  do,  is,  to  modif) 
what  already  exists.  When  we  so  modify  any  thing 
that  it  is  capable  of  gratifying  a  desire  which  before  »l 
was  not  capable  of  gratifying,  our  so  doing  is  called  pro 
duction 


OF     PRODUCE EXCHANGE.  2& 

The  modifications  which  objects  need,  in  order  to 
render  them  capable  of  gratifying  desire,  are  various. 
Sometimes  the  elements  of  the  substance,  sometimes  its 
form.,  and  sometimes  its  place.,  require  be  to  changed. 
Whenever  human  industry  accompHshes  any  of  these 
resuhs,  it  is  called  production ;  the  person  who  exerts 
this  agency  is  called  a  producer ;  and  the  substance 
Itself,  on  which  this  agency  is  exerted,  is  called  a  prod' 

MCt. 

In  some  cases,  we  find  the  substance,  as,  for  instance^ 
ore  in  the  mine,  or  stone  in  the  quarry,  in  its  natural 
state  ;  in  others,  we  receive  it  from  those  who  have  im- 
parted to  it  one  value,  and  we  add  to  it  another.  The 
material  which,  in  either  case,  we  obtain  for  the  purpose 
of  combining  it  with  our  own  industry,  and  forming  it 
into  a  product,  is  called  capital ;  and,  after  the  labor  has 
been  exerted,  and  the  value  created,  it  is  called  a  prod- 
uct. Thus,  the  same  article  may  be  product  to  one, 
and  capital  to  another.  Leather  is  the  product  of  the 
currier,  and  the  capital  of  the  shoemaker. 

The  term  capital  is  not  merely  applied  to  the  material 
on  which  industry  is  to  be  exerted,  but  also  to  all  the 
instruments  by  which  human  industry  is  assisted  ;  as 
well  as  to  whatever  is  necessary  to  the  support  of  that 
industry. 

Of  Exchange.  I  have  said,  above,  that  the  mode  of 
every  man's  industry  is  decided  by  his  individual  tastes 
and  circumstances.  It  is  commonly,  however,  confined 
to  the  creation  of  one  kind  of  product,  inasmuch  as  it 
is  thus  vastly  more  available.  His  desires,  on  the  other 
hand,  are  as  innumerable  as  the  objects  created  to  gratify 
ihem.  He  creates  but  one  value  and  he  wants  a  tlioi:. 
sand.  Hence,  he  can  be  gratified  by  means  of  no  less 
than  nine  hundred  and  ninety-nine  exchanges.  He  thus 
parts  with  various  portions  of  the  value  which  he  has 
created,  for  the  sake  of  obtaining  the  vaKies  which  olhcrs 
have  created.  Hence  the  necessity  of  universal  and 
ceaseless  exchange.  Hence  also  the  reason  \lhy  so 
large  a  portion  of  mankind  devote  themselves  to  the 
business  of  efl^ecting  exchanges.  Those  who  do  so,  are 
3 


26  DISTRIBUTION CONSUMPTION 

called  mirchants.  Those  who  are  employed  in  the 
transportation  oT  wares  or  merchandise  by  sea  or  by 
land,  are  also  engaged  in  effecting  the  same  object. 

Of  Distribution.  In  even  the  very  first  stages  of 
society,  it  is  found  that  the  productive  result  of  human 
power  is  greatly  increased  by  union  of  effort  and  division 
of  labor.  Ten  men,  laboring  together,  can  accomplish 
much  more  than  ten  men  laboring  separately.  Specially 
is  this  the  case  where  the  various  parts  of  a  process  are 
divided,  and  each  one  performs  that  part  for  which  he  is 
best  adapted.  And,  as  capital  accumulates,  it  is  com- 
monly the  case,  that  one  who  owns  the  capital,  unites  in 
'  production  with  another  or  others,  who  perform  the  labor. 
When  the  product  is  realized,  and  the  gains  are  lo  be 
divided,  some  equitable  law  is  to  be  adopted,  in  the  dis- 
tribution. Different  laborers  are  entitled  to  dissimilar 
wages  :  and  there  are  just  proportions  to  be  observed 
between  the  wages  of  labor  and  the  wages  of  capital. 
The  principles  of  this  adjustment  are  treated  of,  by 
Pohtical  Economists,  under  the  head  of  Distribution. 

Of  Consumption.  Suppose,  now,  the  value  lo  be 
created,  and  brought  within  the  reach  of  him  who  desires 
it ;  he  uses  it,  and,  in  the  very  act  of  use,  its  value  is 
destroyed.  We  exchange  labor,  or  money,  or  wheat, 
for  fuel ;  we  use  the  fuel  in  our  fire  places,  and  its  value 
is  destroyed.  We  purchase  bread ;  we  eat  it,  and  its 
value  ceases  forever.  A  baker  purchases  flour,  and 
makes  it  into  bread ;  the  flour  ceases  to  be  flour :  its 
value,  in  this  respect,  is  gone  forever.  This  act,  by 
which  we  annihilate  any  particular  value,  is  called  con- 
sumption. It  is  exactly  the  opposite  to  production. 
Sometimes  the  utility  is  destroyed,  with  no  other  result 
ihan  merely  the  gratification  of  desire.  Such  is  the  case 
with  fire-works,  shows,  and  amusements  of  almost  every 
sort.  At  other  times,  the  value  or  lilility  is  destroyed  ; 
but  it  re-appears,  in  another  and  much  more  valuable 
form.  Thus,  a  side  of  sole  leather  is  cut  up  into  soles,  for 
shoes:  its  value,  as  a  side  of  sole  leather,  is  destroyed 
forever;  but  its  value  re-appears,  in  another  form,  and 
with  an  increased  exchangeable  value.     The  food  which 


DIVISION     OF    SUBJECT  .  27 

we  eat,  disappears;  but  its  value  re-appears,  in  re-animated 
health  and  vigor,  by  which  we  are  prepared  for  subse- 
quent labor.  The  former  is  termed  unproductive^  the 
latter,  productive  consumption. 

The  whole  si  bject  of  Polit'cal  Ecouomy,  may  be 
therefore  divided  into  four  parts. 

The  First  Part  treats  of  Production,  or  the  laws 
which  govern  the  application  of  labor  to  capital  in  the 
creation  of  value. 

The  Second,  or  Exchange,  treats  of  the  principles 
which  govern  men,  when  they  wish,  by  means  of  their 
own  labor,  to  avail  themselves  of  the  labor  of  others. 

The  Third,  or  Distribution,  treats  of  the  laws  by 
which  those  who  have  united  in  the  creation  of  a  prod- 
uct, receive,  respectively,  their  portion  of  the  result. 

The  Fourth,  or  Consumption,  treats  of  the  laws 
which  should  govern  us  in  the  destruction  of  value. 

Each  of  these  subjects  will  be  treated  of,  in  the  above 
order,  in  the  following  work. 


BOOK  FIRST. 


PRODUCTION. 

It  is  obvious  that  when  man  was  first  created,  tlieie 
existed  nothing  but  this  earth,  with  its  various  substances, 
their  quaHties  and  relations  ;  and  man,  with  his  various 
physical,  intellectual,  and  moral  powers.  The  difference 
between  the  present  state  of  man  and  of  the  universe 
around  him,  and  the  original  slate^  consists  in  this :  that 
the  qualities  and  relations  of  things  have  now  been  dis- 
covered, and  rendered  available  to  the  service  of  man ; 
and  the  intellect  of  man  has  been  cultivated,  and  his 
skill  improved,  so  that  he  is  able,  more  successfully,  to 
avail  himself  of  these  qualities  and  relations.  And  it  is 
also  obvious,  that  this  change  in  the  external  world  has 
been  produced  by  the  physical  and  intellectual  faculties 
of  man  ;  that  is,  by  human  industry.  The  whole  wealth 
of  the  world  has  been  created  by  the  union  of  human 
industry  with  the  materials  which  God  had  originally 
spread  around  us.  Hence,  all  that  is  necessary  to  the 
creation  of  wealth,  is  capital  and  industry.  But,  it  is 
also  obvious,  that  the  application  of  industry  to  the  ma- 
terials around  us,  that  is,  to  capital,  has  not  been  at  all 
(iines  either  equally  strenuous,  or  equally  successful. 
'1  here  must,  therefore,  exist  some  rules,  by  which  this 
ajiplication  of  industry  to  capital  is  governed,  and  some 
conditions  under  which  it  is  more  successfully  exerted, 
than  under  others. 

The  subject  of  Production  is,  therefore,  naturally  di- 
vided into  three  parts.  1st.  Capital.  2d.  Industry 
3d.  The  principles  by  which  the  application  of  industry 
to  capiUil  is  governed. 


CHAPTER  FIRST. 

OP    CAPITAL. 

First.  The  nature  tf  Capital.  The  word  eairUal 
is  used  in  two  senses. 

When  used  in  relation  to  product,  it  means  any  sub- 
stance on  which  industry  is  to  be  exerted.  Aftei  that 
industry  has  been  exerted^  it  then  becomes  product. 
Thus,  leather  is  the  capital  of  the  shoemaker,  and  shoes 
are  his  product. 

When  used  in  relation  to  industry,  however,  it  has  a 
much  wider  signification.  It  then  signifies  the  material 
on  which  industry  is  about  to  confer  value,  that  on  which 
it  has  conferred  value,  and  the  instruments  which  are 
used  for  the  conferring  of  value,  as  well  as  the  meam 
of  sustenance^  by  which  the  being  is  supported  whilst  he 
is  engaged  in  performing  the  operation.  The  capital  of 
an  individual,  if  it  be  examined,  will  be  found  to  be 
composed  of  all  these.  Thus,  also,  the  capital  of  a 
nation  is  composed  of  raw  material,  of  articles  ready  to 
be  -consumed,  of  buildings,  ships,  manufactories,  and 
also  of  the  various  substances,  by  which  human  hfe  is 
prolonged  and  rendered  desirable. 

Second.  The  forms  of  Capital.  Hence  it  must 
be  seen  that  the  forms  of  capital  must  be  as  various  as 
the  various  employments  of  man. 

1.  The  Fcft  ner  possesses  seed,  manure,  breeding 
animals,  &c. 

The  Manufacturer  possesses  cotton,  wool,  flax,  iron, 
leather,  wood,  and,  in  general,  all  the  material  on  which, 
according  to  his  particular  calling,  he  desires  to  exetl 
his  industry. 

The  Merchant  possesses  sugar,  tea,  coffee,  iron,  &c. 
or  the  various  substances  to  which,  by  transportation,  he 
has  added,  or  to  which  he  intends  to  add,  value. 


CHANGES    OF    CAPlfAL.  31 

2.  But,  in  order  to  effect  this  intended  creation  of 
value,  it  is  found  that  intermediate  agents  must,  in  all 
these  cases,  be  employed.  A  farmer  could  not  reap 
with  his  fingers,  nor  a  miner  dig  with  his  hands,  nor  a 
manufacturer  labo:  without  tools.  All  these  instruments^ 
the  use  of  which  is  necessary  to  the  creation  of  value, 
are,  therefore,  also  termed  capital. 

Thus,  the  ploughs,  harrows,  spades,  carts,  and  work- 
ing animals  of  the  farmer,  are  a  part  of  his  capital.  To 
the  same  class  also,  perhaps,  belongs  his  land. 

The  axes,  planes,  hammers,  of  the  mechanic,  and  the 
buildings  and  machinery  of  the  manufacturer,  are  iheii 
capital. 

Under  this  division  of  capital  may  also  be  included 
the  ship  of  the  merchant,  the  wagon  of  the  teamster, 
and -the  railroad  and  locomotive  of  the  proprietor. 

3.  Butj  besides  all  this,  these  several  persons  must 
be  fed  and  clothed,  whilst  they  are  exerting  the  indus- 
try by  which  value  is  given  to  these  various  products. 
Pience,  under  the  head  of  Capital,  must  be  comprehended 
all  the  various  kind^  of  food,  the  clothing,  and  houses, 
which  are  necessary,  in  order  to  give  sustenance  to  a 
human  being.  These  are  generally  the  same,  in  all 
kinds  of  indurtry. 

4.  And,  lastly,  every  individual,  in  each  of  these 
departments  of  human  industry,  will  retain  some  portion 
of  the  product  which  he  has  created,  but  which  he  is 
ready  to  part  with  for  something  else.  The  farmer  has* 
grain,  which  he  has  raised  ;  the  manufacturer,  cloth, 
which  he  has  fabricated ;  the  merchant,  commodities, 
which  he  has  imported  or  bought  for  sale.  These  form 
another  item  of  capital. 

Third.  Of  the  changes  which  Capital  undergoes. 
From  what  has  been  already  said,  it  is  evident,  thai 
capital  derives  its  value  from  labor,  and  that  the  effect 
of  labor  exerted,  is  to  produce  some  change  in  it 
Hence,  capital,  in  every  industrious  country,  must  be 
always  imdergoing  changes ;  and  hence,  also,  it  fre- 
quentlv  re-appears,  in  forms  very  different  from  those  in 
tvliich  it  at  first  existed.     The  form,  however,  is  of  no 


32  CHANGES    OF    CAPITAL. 

consequence,  if  a  superior  value  be  the  result.  Political 
Economy,  unmindful  of  the  form,  looks  only  at  an  aug- 
mentation, either  of  the  amount,  or  of  the  degree  of 
value. 

1.  The  material  undergoes  changes. 

The  seed  and  manures  of  the  farmer  are  changed 
into  vegetables,  and  these  again  into  the  grain  of  the 
liarvest. 

The  cotton  and  wool  of  the  manufacturer  are  changed 
into  the  fabrics  which  he  produces.  The  wood  and 
nails  of  the  carpenter  are  changed  into  houses. 

The  commodities  of  the  merchant  undergo  changes. 
He  exports  cotton,  rice,  wheat,  or  manufactures ;  and 
imports  calicoes,  silks,  wine,  hardware,  &c. 

2.  The  instruments,  or  machinery,  employed  by 
these  several  classes  of  persons,  undergo  changes. 
These  several  instruments,  in  the  course  of  production, 
are  gradually  destroyed,  or  consumed.  The  plough  and 
cart,  and  animals  of  the  farmer,  the  tools  of  the  me- 
chanic, the  machinery  of  the  manufacturer,  and  the  ships 
and  vehicles  of  t|ie  merchant,  are  worn  out  and  rendered 
worthless.  But  if  they  have  been  profitably  used,  they 
have  re-appeared,  in  the  increased  value,  which  they 
have  conferred  upon  the  various  objects  upon  which  they 
hive  been  employed. 

3.  The  various  kinds  of  food,  clothing,  and  shelter, 
necessary  for  the  existence  and  comfort  of  the  human 
being,  are  also  changed.  They  are  consumed,  from 
time  to  time,  and  their  value  re-appears,  in  that  new 
vigor  imparted  to  his  body  and  mind,  which  forms  i 
fresh  capital,  to  be  employed  again  in  the  work  of  pro- 
duction. 

4.  And  lastly  :  The  mature  product  of  every  laborer 
is  constantly  changing.  As  soon  as  he  has  created  a 
product,  he  is  anxious  to  dispose  of  it  to  some  one  else, 
ihat  he  may  invest  its  increased  value  in  some  other  ma- 
terial which  he  may  again,  with  increased  advantage, 
unite  with  industry.  As  soon  as  the  farmer  has  raised 
(grain  or  fat  cattle,  he  wishes  to  dispose  of  them,  that  he 
may  invent  their  value  again  in  seed,  or  manure,  or  agri- 


INCREASE    OF    CAPITAL.  SS 

cultural  inipro\  ements.  As  soon  as  the  manufacturei 
has  finished  his  fabric,  he  exchanges  it  for  the  means  of 
subsistence,  materials,  or  machinery ;  and  so  of  the 
merchant,  and  of  every  other*  laborer. 

We  see,  then,  that  capital  is  undergoing  perpetual 
changes,  and  that  the  course  of  these  changes  is  con- 
stantly from  a  state  of  less,  to  a  state  of  greater  value  ; 
that  is  from  a  state  more  remotely  adapted  to  the  grati- 
fication of  human  desire,  to  a  state  less  remotely  adapted 
to  it ;  and  that  so  soon  as  it  has  become  precisely 
adapted  to  this  gratification,  its  change  ceases,  and  it  is 
consumed  in  some  mode  or  other.  And  if  it  be  profit- 
ably consumed  it  again  re-appears  in  some  'form  adapted 
to  create  a  further  increase  of  the  means  of  eiijoyment. 
And  hence  we  see,  that,  that  country  is  the  most  pros- 
perous which  is  the  most  rapidly  accumulating,  by  the 
results  of  its  labor,  the  greatest  amount  of  these  ultimate 
products,  in  proportion  to  the  number  of  its  inhabitants. 
The  greater  the  share  of  these  products  which  falls  to 
the  lot  of  each  individual,  the  greater  are  the  means  of 
physical  happiness  in  his  possession. 
,  Fourth.  The  increase  of  Capital.  In  all  these 
changes  which  we  have  considered,  it  is  always  to  be 
remarked,  that  there  is,  in  the  very  act  of  change,  a 
destruction  of  value.  He  who  .changes  iron  into  steel, 
consumes  the  iron,  destroys  that  particular  value  and 
creates  another  in  its  place.  He  who  sows  wheat,  de- 
stroys the  value  of  that  wheat,  for  food  ;  and  he  who 
spins  cotton,  destroys  the  value  of  cotton  wool  as  (  otton 
wool.  That  is,  neither  of  these  substances  can  ever  be 
used  again  for  the  purposes  to  which  they  were  before 
adapted.  If,  however,  the  industry  of  the  'aborer  have 
been  skilfully  directed,  the  product  will  have  actjtiired 
an  exchangeable  value  sufficient  to  replace  the  original 
material  in  additional  quantity,  and  also  to  repay  him  foi 
bis  labor,  and  pay  the  interest  of  his  ca|)ital.  The 
amount  of  difference  between  the  exchangeable  value  of 
his  original  material,  together  with  his  labor,  and  the  ex- 
changeable value  of  his  product,  is  his  profit.  The 
annual  amount  of  these  profits,  is  his  armual  gross  rev 


M  INCREASE     OF     CAPITAL. 

cnue.  The  annual  amount  of  these  profits  in  a  nation ^ 
is  the  gross  national  revenue. 

It  is  obvious,  that  it  matters  not  in  what  form  capita! 
re-appears,  if  it  only  re-appear  in  a  form  bearing  a  great- 
er exchangeable  value.  The  smith  exchanges  grid  or 
silver  for  coal  ;  he  burns  up  his  coal,  and  nothing  is  loft 
but  ashes.  But  it  has  produced  an  invisible  substance, 
called  caloric,  by  means  of  which  he  has  been  able  to 
give  such  an  increased  value  to  iron,  as  will  not  only  re- 
[jlace  his  gold  and  silver,  but  also  the  iron  itself,  and  will 
also  pay  him  for  his  labor.  The  farmer  exchanges  his 
gold  or  silver  for  manure,  but  tliis  manure  will  so  increase 
his  harvest,  that  he  will  be  able  to  replace  his  gold  and 
silver,  and  also  be  abundantly  repaid  for  his  labor.  The 
principle  is  the  same,  in  all  cases  of  change  of  capital. 
It  matters  not  into  what  we  change  our  capital,  nor  how 
valuable  the  substance  may  be  that  is  exchanged,  if  we 
only  receive,  in  return,  a  greater  amount  of  exchange- 
able value,  or  that  which  will  procure  for  us  a  greater 
amount  of  objects  of  desire. 

We  see,  hence,  in  what  manner  nations  and  individu- 
als grow  rich.  It  is  by  uniting  the  industry  of  this  year 
to  the  capital  of  last  year,  and  by  this  process,  creating 
an  augmentation  of  capital.  This  augmentation  will  be 
either  greater  or  less,  jn  proportion  as  our  industry  has 
been  successful  in  giving  additional  value  to  that  value 
which  previously  existed.  If  we  destroy  a  value,  and 
produce  another  only  equal  to  it,  we  lose  our  labor.  If 
we  destroy  a  value,  and  re-produce  nothing,  we  lose 
both  labor  and  capital.  It  is  only  as  the  value  creJated 
15  superior  to  the  value  of  labor  and  capital  consumed, 
that  we  are  enriched.  Hence  we  see,  that  wealth  is 
acquired  by  small,  but  oft  repeated  accumulations.  The 
gross  amount  of  these  accumulations  will  be  decided  by 
our  skill  and  industry.  But,  as  from  this  amount  our 
vailous  expenditures  must  be  subtracted,  our  nett  reve- 
nue will  depend  not  only  on  our  skill  and  industry,  but 
also  on  our  frugality.  Though  a  man  earn  much, 
yet,  if  he  spend  all,  he  will  grow  no  richer.  Hence, 
industry  and  frugality  are  the  great  sources  of  wealth 


OF    PRODUCTIVE    AND    UNPRODUCTIVE     CAPITAL.    35 

Nor  is  this  the  less  true  of  nations.  Hence  it  is,  that 
wars,  unnecessarily  expensive  governments,  or  high  tax- 
es for  whatever  purpose,  may  keep  the  most  enterprising 
and  industrious  nation  always  poor. 

Fifth.      Of  Productive  and  Unproductive  Capital. 

Productive  capital  is  that,  which,  being  in  any  man 
ner  united  with  industry,  is  in  the  process  of  augmenla- 
tion.  Unproductive  capital  is  that,  which,  not  being 
united  with  industry,  remains,  at  the  end  of  the  yenr, 
just  the  same  as  it  was  at  the  beginning.  Money  a  I 
interest,  capital  undergoing  the  various  transformations 
effected  by  industry,  tilled  land,  and  manufactories  in 
operation,  are  productive  capital.  Money  lying  in  cof- 
fers, materials  unsaleable,  manufactories  unoccupied,  and 
land  lying  waste,  are  unproductive  capital. 

When  capital  is  unproductive,  it  may  be  considered 
as  losing  for  us,  annually,  its  ordinary  rate  of  interest  ; 
because  it  must  have  been  purchased  with  that  which 
would  have  yielded  that  interest.  Hence  it  is,  that 
every  sound  economist  is  anxious  to  have  the  whole  of 
his  capital  productively  invested.  He  who  acts  other- 
wise, is  ignorant  of  the  principles  of  production,  indo- 
lent, or  slovenly.  The  farmer  who  allows  a  heap  of 
manure  to  lie  in  his  farm  yard  for  a  year,  instead  of 
spreading  it  on  his  land  ;  the  merchant  who  allows  his 
ships  to  he  idle,  or  his  goods  to  be  scattered,  unsold, 
over  several  warehouses  ;  or  the  manufacturer  who  owns 
twice  as  much  machinery  as  he  is  able  to  employ,  are 
annually  losing  all  the  accumulation  which  this  capital, 
properly  invested,  would  produce.  And  still  more,  as 
we  have  seen  that  all  gains  arise  from  small  and  siif* 
cessive  accumulations,  and  as  almost  every  product  \a 
hablc  to  waste,  it  is  manifest  that  habitual  negligence  of 
this  sort  must  greatly  diminish,  if  it  do  not  entirely 
consume,  all  the  nett  revenue  of  an  establishment.  The 
effort  of  every  man  should  be,  to  unite  every  fraction  of 
his  capital  with  indtistry,  and  to  keep  it  so  united,  con- 
tinually- Any  gain,  even  the  smallest,  is  better  than  no 
gain  at  all. 

KroiTi  what  has  beep  said,  it  is  evident  that  the  pro- 


36  OF    FIXED    AND    CIRCULATING    CAPITAL. 

cess  of  accumulation,  in  all  branches  of  production,  is 
»he  same.  Tt  will  also  appear,  that  where  capital  is  free, 
that  is,  where  there  are  no  restrictions  upon  the  use  of 
It,  there  can  be  no  great  permanent  difference  in  the 
rate  of  accumulation,  between  the  different  modes  in 
which  it  is  employed.  If  the  profits  of  one  kind  of 
business  are  above  the  average  rate,  other  capital  will 
flow  into  that  channel.  If  the  profit  in  any  branch  of 
production  be  below  the  ordinary  rate,  capital  will  be 
withdrawn  from  it.  If  commerce  be  unusually  lucrative, 
men  will  leave  other  pursuits,  and  devote  themselves  to 
commerce,  until,  by  competition,  they  reduce  the  profits 
to  the  ordinary  rate.  If  commerce  be  depressed,  men 
will  leave  it,  until,  by  the  reduction  of  the  supply  of 
commercial  facilities,  the  rate  of  profit  is  increased. 
Rates  of  profit  cannot  be  rendered  permanently  unequal 
in  any  other  manner,  than  by  oppressive  legislation. 
The  differences  in  profit,  in  the  various  departments  of 
industry,  are,  therefore,  more  apparent  than  real.  When 
profit  is  sure,  it  is  of  course  less  than  when  it  is  uncer- 
tain. But,  how  much  soever  individual  cases  may  differ, 
it  will  be  found  that  the  average  is,  for  long  periods,  very 
nearly  equal. 

Sixth.  Of  Fixed  and  Circulating  Capital.  The 
capital  from  which  the  owner  derives  profit  only  by 
exchanging  its  form  or  place,  is  circulating  capital. 
Thus,  the  wares  of  the  merchant,  the  products  of  the 
manufacturer,  the  harvest  of  the  farmer,  are  circu- 
lating capital.  On  the  other  hand,  the  instruments 
which  each  of  these  producers  uses,  in  performing  his 
various  operations,  are  fixed  capital.  Such  are  the 
ships  and  warehouses  of  the  one,  the  machines  and 
buildings  of  the  other,  and  the  tools  and  land  of  the 
third. 

Circulating  capital  is,  in  general,  that  which  is  already 
prepared  for  the  gratification  of  human  desire,  or  that 
which  is  in  a  course  of  preparation  for  this  state.  Fixe«l 
capital,  in  general,  consists  of  the  instruments,  or  fix- 
tures, which,  in  some  form  or  other,  assist  us  in  accom- 
plishing this  result.     Tools,  machinery,  houses,  ships, 


OF    FIXED    AND    CIRCULATING    CAPITAL  3? 

roads,  canal?,  and  improvements  on  farms,  &c.,  aro 
fixed  capital.  Circulating  capital  is  in  general  rapidly 
consumed.  It  is  commonly  an  annual  product,  and  sub- 
ject to  an  annual  consumption.  Fixed  capital  is  not  an 
annual  product,  and  may  last  for  a  year,  a  lifetime,  or 
indefinitely.  It  is,  however,  still  liable  tb  gradual  decay, 
which  decay  must  be  replaced,  or  else  the  possessor 
vrould  find  himself  growing  poorer,  inasmuch  as  these 
tools  and  machinery  are  the  means  by  which  his  labor 
•3  rendered  productive. 

The  amount  of  fixed  capital  employed  in  somo 
branches  of  industry,  is  much  greater  than  that  in  others. 
C?ome  mechanical  trades  require  no  more  fixed  capital 
than  a  cheap  set  of  tools.  Others,  as  large  manufacturing 
estabhshments,  require  a  large  fixed  investment.  In  pro- 
portion to  the  amount  which  must  be  thus  employed,  will 
be  the  amount  of  accumulated  property  necessary  to  be 
possessed  by  him  who  wishes  to  employ  himself  in  that 
particular  department  of  industry.  Sometimes,  by  far 
the  greater  part  of  the  investment  is  fixed  capital,  and  it 
is  also  very  great  in  amount.  In  this  case,  it  is  fre- 
quently apportioned"  among  individuals,  wlio  each  sub- 
scribe and  pay  a  part  of  the  cost.  Such  is  the  case 
with  railroads,  canals,  and  works  of  public  improvement 
generally. 

There  is  an  obvious  tendency  in  the  nature  of  things, 
to  convert  circulating,  into  fixed  capital.  As  circulating 
capital  is  annually  consumed,  it  must  be  annually  re- 
placed, or  mankind,  after  the  first  year,  would  all  perish 
It  is  replaced  by  the  annual  productions  of  the  eartli, 
either  vegetable,  animal,  or  mineral.  But,  if  the  indus- 
try of  man  has  been  successfully  exerted,  the  amount  of 
annual  production  will  be  sufficient,  not  only  to  supply 
the  f)rdinary  wants  of  the  producers,  and  to  repair  the 
wasie  and  wear  of  fixed  capital,  but  also  to  leave  a  sur- 
plus unappropriated.  Now,  as  this  kind  of  capital  is 
annual,  and  as  it  is  also  perishable,  if  it  be  not  used  in 
some  way,  this'  surplus  must  be  a  total  loss.  If  it  be 
appropriated  to  the  multiplication  of  annual  capital,  it 
«-ill  only  increase  that  surplus,  which  is  already  too 
4 


38  OF    FIXED    AND    CIRCULATING    CAPITAL. 

great.  Hence,  it  can  be  usefully  employed  only  in  the 
creation  of  fixed  capital.  To  accomplish  this  result,  it 
is  oftbred  in  the  form  of  wages,  to  mechanics,  artisans, 
and  those  persons  who  employ  themselves  in  the  manu 
factiire  of  thosp  articles,  in  which  fixed  capital  consists. 
Hence,  the  wages  of  this  class  of  persons  will  rise,  and 
a  portion  of  them  will  be  drawn  from  the  production  of 
Ci;H;ulating  capital.  This  might  at  first  be  supposed  tn 
diminish  the  amount  of  circulating  capital.  Such  would 
be  the  result,  were  it  not  for  the  fact,  that  the  very  ob- 
ject of  fixed  capital,  is  to  enable  us  to  create  circulating 
capital,  with  a  less  amount  of  labor.  A  society,  in 
which  a  part  of  the  members  are  devoted  to  the  making 
of  useful  machines,  will  create  a  greater  amount  of  an- 
nual products,  than  one  in  which  all  are  devoted  exclu- 
sively to  the  creation  of  annual  products.  Thus,  in  a 
short  time,  the  annual  surplus  is  greater  than  before,  and 
a  greater  number  of  persons  is  employed  in  creating 
fixed  capital,  and  that  kind  of  fixed  capital,  which  in- 
volves, in  its  creation,  a  greater  amount  of  expense. 
ft  is  thus  that  a  society,  age  after  age^  grows  rich,  and 
each  successive  race  of  men  leaves  the  world  better 
provided  with  the  means  of  production,  than  it  found  it. 
This  may  all  be  illustrated,  by  a  few  very  familiar  in- 
stances. A  savage,  who  obtains  peltry  by  his  bow  and 
arrows,  having  provided  for  the  food  and  clothing  of  his 
family,  will,  if  he  be  industrious,  possess  a  surplus  which 
must  now  be  useless  to  him.  He  would  naturally  ex- 
change his  surplus  for  a  rifle  ;  a  kind  of  fixed  capital, 
by  means  of  which,  his  circulating  capital  would  be 
greatly  increased.  This  increase  of  capital  would  en- 
able him,  besides  procuring  better  clothes  and  more  nu 
morons  conveniences,  to  add  to  his  fixed  capital  by  pur- 
chasing a  horse,  or  a  plough,  or  by  erecting  a  house. 
These,  in  their  turn,  would  augment  his  circulating  capi« 
(al  ;  and  thus,  with  every  year,  his  fixed  and  circulating 
capital  would-  steadily  increase.  Hencej  very  soon, 
there  would  arise  a  demand  for  the  services  of  men  who 
employed  themselves  in  creating  fixed,  instead  of  circu- 
lating capital.     That  is,  mechanical  arts  would  be  prac- 


OF    FIXED    AND    CIRCULATING    CAPITAL.  39 

tised  :  and  the  artisans  would  be,  as  we  find  that  lu  such 
a  state  of  society  tliey  always  are,  exorbitantly  paid  foi 
their  labor. 

Again  :  Suppose  a  farmer  to  enter  upon  new  and  un- 
l(lle<riand.  His  first  care  is  to  produce  the  necessities 
of  lifcj  for  himself  and  his  family.  When  this  is  ac- 
complished, he  appropriates  a  part  of  his  labor  to  the 
creation  of  fixed,  instead  of  annual  capital  :  that  is,  he 
erects  fences,  purchases  with  his  produce  carts  and  ani- 
mal, builds  barns  and  outhouses,  and  thus  renders  hi? 
farm  a  much  more  productive  instrument  than  before. 
With  his  increasing  surplus  he  purchases  additional  land, 
if  he  needs  it,  and  brings  it  all  into  such  a  state  of  culti- 
vation as  he  thinks  desirable.  By  all  these  means,  his 
annual  surolus  is  rendered  greater,  and  he  is  enabled  to 
extend  the  amount  of  his  fixed  capital,  by  building  a 
better  house,  purchasing  better  ploughs,  harrows,  carts, 
and  various  machines  by  which  his  future  labor  will  be 
rendered  more  productive.  But  we  see  that  this  could 
not  be  done  by  the  farmers  of  a  neighborhood,  unless 
some  portion  of  them  abandoned  farming,  and  devoted 
themselves  to  the  creation  of  fixed  capital.  There 
would,  therefore,  arise  a  great  demand  for  mechanical 
labor.  And  as  there  would  hence  arise  the  necessity 
for  a  great  number  of  exchanges,  some  portion  of  the 
society  must  devote  themselves  to  effecting  them  ;  that 
is,  must  become  merchants.  In  this  manner,  circulating 
f:apital  first  gives  rise  to  fixed  capital,  and  fixed  capita! 
increases  again  the  amount  of  circulating  capital  ;  and 
thus  tliey  go  on,  year  after  year,  mutually  augmenting 
each  other. 

Thus  also  the  merchant,  whose  business  it  is  to  aug 
ment  the  exchangeable  value  of  a  given  amount  of  cir 
culatmg  capital   by  transportation  and  exchange'  pro 
duces,  by  his  operations,  an  annual  surplus.     This  he 
adds  to  his  former  capital,  for  a  while,  but  soon  pur- 
chases fixed  capital,  such  as  ships,  &c.,  to  facilitate  his 
operations.    When  he  has  enough  of  these,  and  as  large 
an  amount  of  circulating  capital  as  he  wishes  to  employ, 
be  then  begins  to  invest  his  surplus  either  in  some  pei- 


40  OF    FIXED    AND    CIRCULATING    CAPITAL. 

mancnt  works  of  public  improvement,  as  bridges,  roads, 
canals,  or  in  something,  which,  besides  facilitating  the 
productiveness  of  the  society,  will  also  yield  him  a  rev- 
enue, or  else  he  employs  it  in  manufactures,  according, 
to  the  condition  of  the  country,  and  its  natural  demaKcK* 
and  facilities. 

From  what  has  been  remarked  above,  we  may  easily 
see  the  natural  course  which  a  nation  takes,  in  the  pro- 
gressive accumulation  of  wealth.  Its  first  production* 
are,  circulating,  or  annual  capital ;  the  products  of  the 
field,  of  the  forest,  or  of  the  ocean.  Next  follow  im- 
provement in  permanent  conveniences,  and  the  construc- 
tion of  instruments  for  agricultural  production  ;  then  the 
exchange  of  its  own  products  for  other  circulating  capi- 
tal, or  for  the  annual  necessaries  of  hfe  ;  and  then  the 
exchange  for  fixed  capital  of  the  most  necessary  kind. 
Thus,  the  Dutch,  on  their  first  settlement  in  this  coun- 
try, used  to  import  their  bricks  from  Holland.  Com- 
merce being  thus  commenced  with  an  older  country,  the 
colonists  soon  engage  in  it  themselves,  and  invest  a  large 
portion  of  their  annual  surplus  in  ships.  Before  manu- 
factures had  commenced  in  this  country,  previously  to 
the  Revolution,  the  commerce  of  the  colonies  had  be- 
come already  extensive.  All  these  changes  prepare  the 
way  for  the  investment  of  capital  in  manufactures,  which, 
In  their  proper  and  natural  time,  must  be  established  ; 
and  \vhen  that  time  arrives,  they  mil  be  established, 
without  the  aid  of  legislative  enactment,  and  according 
to  the  very  laws  by  which  accumulation  is  governed. 

From  what  has  been  remarked,  we  also  see  that  the 
advantages  which  we  enjoy  over  savage  nations  result, 
principally,  from  the  possession  of  a  greater  amount  of 
fixed  capital ;  or,  in  other  words,  the  permanent  results 
of  pre-exerted  industry.  That  advantage  consists  in 
this,  that  this  capital,  besides  affording  to  its  owners  the 
ordinary  rate  of  profit,  enables  men  to  produce  at  a 
much  cheaper  rate ;  that  is,  at  a  less  expense  of  labor. 
Thus,  a  cotton  factory,  besides  affording  a  fair  profit  to 
the  owner,  enables  him  to  do,  by  one  hour's  labor,  what 
would  other^^ise  require  the  labor  of  days  or  of  weeks 


OF    MONEY.  41 

by  all  this  difference,  therefore,  we  have  the  advantage 
over  savages,  or  over  those  vviio  went  before  us.  Hence, 
a  nation,  which  does,  not  possess  the  resuUs  of  pre- 
exerted  industry,  must  be  poor,  unless  its  natural  ad- 
vantages enable  it  to  avail  itself  of  those  of  othei 
countries.* 

Hence,  we  also  see  the  reason  why  the  traffic  between 
.savage  and  civihzed  nations  is  so  greatly  in  favor  of  llie 
(alter.  The  latter  are  enabled  to  offer  in  barter  that 
which  is  of  inestimable  value  to  the  savage,  but  which 
the  civilized  man  can  produce  with  a  very  small  portion 
of  labor.  An  axe  would  cost  a  savage  the  labor  of 
weeks  or  of  months,  while  a  smith  in  New  England 
would  make  it  in  a  few  hours.  Hence,  it  is  not  wonder- 
ful that  the  one  should  be  willing  to  give  for  it  vastly 
moie  than  it  costs  the  other.  And,  on  the  other  hand, 
the  commodities  of  the  savage  are  of  very  little  value  to 
liirtiy  but  of  high  value  to  the  mechanic  or  artisan. 
Hence,  the  gain  to  him  also  is  great.  An  Indian  who 
exchanges  peltry,  which  is  worth  in  New  York  fifty  or 
one  hundred  dollars,  for  a  rifle,  powder,  and  bullets,  has 
improved  his  condition,  by  means  of  the  purchase, 
really  more  than  the  gunsmith,  who  has  made  so  exor- 
bitant a  profit. 

Seventh.  Of  Money.  It  will  be  observed  that, 
thus  far,  I  have  not  mentioned  money  as  an  item  of  cap- 
ital. Although  this  is  not  the  place  in  which  to  treat  of 
die  functions  of  money,  yet  it  may  be  proper  here  to 
ddd  a  single  remark  concerning  it. 

Money  forms  but  a  very  small  part  of  the  capital  of 
any  country.  Every  one  may  easily  judge  of  this,  froni 
his  own  observation.  How  very  small  a  portion  of  any 
one's  possessions  is  in  money.  And  if.^his  be  true  of 
every  individual  separately,  it  must  be  true  of  all  the  in- 
dividuals collectively. 

•  Or,  in  other  words,  as  it  is  well  expressed  by  Mr.  Carey,  in  hia 
la(9  work  on  this  subject;  the  quality  as  well  as  the  quiintUy  of  labor, 
enters  into  tlie  account,  whenever  we  speak  of  the  exchangeable 
ralue  of  the  products  which  it  has  created.  Thf  quality  of  labor  is 
tlwaya  in  proportion  to  tlie  amount  of  prc^exerted  industry  with 
which  it  operates. 

4* 


42  OF    MOAKY. 

The  sole  use  of  money,  is  to  facilitate  exchanges. 
It  is  an  instrument  for  the  saving  of  labor,  and  for  the 
performing  of  labor  with  greater  accuracy.  Of  this, 
any  one  may  convince  himself  in  a  moment,  if  he  will 
imagine  two  cases,  in  the  one  of  which  he  was  obliged 
to  make  several  exchanges  without  money,  and  the 
other  in  which  he  could  make  them  with  it. 

Money  gains  nothing  by  exchange,  but  rather  loses  in 
value,  like  every  other  machinery  which  is  worn  out 
while  it  accomplishes  its  object.  Hence,  it  belongs  to 
the  class  of  fixed  capital.  It  is  subject  to  slow  wear, 
which  must  be  replaced  out  of  the  circulating  capital  of 
the  country. 

And,  hence,  as  any  country  may  have  a  greater 
amount  of  any  particular  kind  of  fixed  capital  than  it 
needs,  as,  for  instance,  of  any  particular  kind  of  ma- 
chinery ;  and  as,  when  this  is  the  case,  it  sends  it 
abroad,  or  in  other  words,  makes  it  an  article  of  export, 
or  changes  it  into  circulating  capital,  so  is  it  with  money. 
If  a  country  has  more  money  than  is  sufficient  to  ac- 
complish its  exchanges,  it  sends  it  abroad,  and  receives 
back  something  that  it  needs  more.  Such  is,  perma- 
nently, the  case  in  mining  countries  ;  and  such  is,  at 
times,  the  condition  of  almost  every  commeicial  nation. 


CHAPTER  SECOND. 

OP    INDUSTRY. 

Having,  in  the  previous  chapter,  explained  the  nature 
b;j  1  chang3s  of  Capital,  we  now  proceed  to  treat  of 
Industry.  In  doing  this,  we  shall  consider  :  1st.  The 
different  objects  of  Human  Industry  ;  2d.  The  forms 
of  Human  Industry ;  and,  3d.  The  modes  by  which 
the  productive  power  of  Human  Industry  may  be  in- 
creased. 

PART  I. 

THE  OBJECTS  AND  FORMS  OF  HUMAN  INDUSTRY. 


SECTION  I. 
THE    DIFFERENT    OBJECTS    OF    HUMAN    INDUSTRY. 

It  has  been  seen,  in  the  previous  chapter,  that  the  in- 
crease of  capital  ;  that  is,  the  means  of  physical  happi- 
ness to  man,  can  be  effected  only  by  producing  change, 
of  some  kind,  in  capital.  But  it  is  evident  that  this 
change  cannot  be  produced  without  labor,  since  no  valu- 
able change  is  spontaneous.  Hence,  the  great  object 
of  human  industry  is,  to  produce  some  valuable  change 
ill  capital. 

Now,  the  changes,  which  may  be  produced  in  the 
substances  of  nature,  may  all  be  reduced  to  three  ; 
change  in  the  elementary  form,  change  in  the  aggregate 
Jorniy  and  change  in  place.  To  effect  one  or  the  other 
of  these,  all  valuable  human  labor  is  directed. 

1 .  Man  may  change  the  elementary  form  of  matter. 
The  farmer,  by  means  of  seed,  manure,  and  cultivation, 


44  THE    OBJECTS    OF    HUMAN    INDUSTRT. 

aided  by  the  agencies  of  the  sun  and  the  earth,  of  rain, 
and  the  atmosphere,  transforms  the  elementary  forms  of 
carbon,  gases,  and  water,  into  wheat.  '  The  chemist 
changes  the  elementary  forms  of  acids  and  alkalies  into 
salts.  The  dyei  changes  the  elementary  forms  of  iron 
and  tannin  into  coloring  matter  ;  and  the  case  is  the 
same  with  the  various  other  forms  of  human  occupa- 
tion. 

2.  Man  may  change  the  aggregate  form  of  matter. 
The  cabinet-maker  changes  the  form  of  a  board  into 
that  of  a  desk  or  a  table  ;  the  smith,  a  piece  of  iron 
into  a  horse-shoe  or  a  nail  ;  the  mason  changes  a  pile  of 
bricks  and  mortar  mto  a  wall  ;  the  cotton  spinner,  a  bale 
of  cotton  into  thread  ;  the  weaver,  this  thread  into  cloth. 
And,  in  general,  the  labor  of  mechanics  and  manufac- 
turers  is  employee  in  effecting  changes  in  the  aggregate 
forms  of  matter. 

3.  Man  may  change  the  place  of  matter.  Thus, 
the  shipmaster  transports  a  cargo  of  cotton  from  New 
York  to  Liverpool,  and  brings  back  a  cargo  of  cotton 
goods,  of  crockery,  or  of  hardware.  The  teamster  re- 
ceives a  wagon  load  of  merchandise  in  one  town,  and 
transports  it  to  another.  The  owner  of  a  canal  boat 
receives  manufactured  goods  in  Albany,  transports  them 
to  Buffalo,  and  brings  back  to  Albany,  in  return,  a 
freight  of  agricultural  produce.  The  agent  of  a  railroad 
receives  a  hundred  boxes  of  merchandise  in  Manchestei, 
and  transports  them  to  Liverpool.  And  thus,  also,  a 
huge  number  of  the  inhabitants  of  every  populous  town 
derive  their  subsistence,  and  frequently  grow  rich,  sim- 
ply by  transporting  wares  and  merchandise  from  one 
part  of  the  town  to  another. 

'I'he/.e  divisions,  in  general,  correspond  with  the  agii- 
cultural,  mechanical,  and  commercial  departments  of  hu- 
man industry.  I  have  adopted  a  different  terminology, 
because  it  seems  to  me  to  form  a  more  generic  and  bet- 
ter limited  division,  and  one  more  conformable  to  the 
facts  in  the  case. 

1.  Concerning  these  divisions,  it  is  proper  to  remark, 
tlu  t,  though  the'se  are  the  varioi  s  objects  of  human  in- 


THE    OBJECTS    OF    HUMAN    INDUSTRY.  4j 

duslry.  yet  it  frequently  happens  that,  he  who  labors  in 
one,  is  also  obliged  to  labor  in  one  or  both  of  the  others 
Thus,  the  farmer  who  raises  a  crop,  is  obhged  to  trans- 
port the  seed  to  the  field,  and  frequently  to  transport  his 
harvest  to  market.  The  cabinet-maker  who  manufac- 
tures a  table,  may  transport  his  materials  from  the  linnbei 
yard.  The  engineer,  on  the  railroad,  is  obhged  to 
change  the  elementary  form  of  wood,  in  order  to  produce 
the  caloric,  necessary  to  move  his  locomotive.  We 
designate  the  class  of  laborers  to  which  a  man  belongo, 
by  the  ultimate  object  which  he  has  in  view,  in  exercis- 
ing his  profession. 

2.  Each  one  of  these  forms  of  industry  is  equally 
important  in  conferring  intrinsic  value  upon  substances  ; 
that  is,  in  giving  them  capacity  to  gratify  human  desire. 
Thus  we  see  that  the  ore  in  the  mine  has  no  power  to 
gratify  desire,  until  it  is  made  into  iron  or  steel.  The 
steel  is  valueless  for  the  purpose  of  cutting,  until  it  is 
transformed  into  a  knife,  an  axe,  or  some  cutting  instru- 
ment ;  and,  if  I  want  to  make  a  pen  in  New  York,  a 
knife  is  utterly  valueless  to  me  for  this  purpose,  while  it 
remains  in  Sheffield  or  Liverpool.  Unless  these  several 
values  are  all  conferred  upon  it,  it  would  be  of  no  ser- 
vice to  me.  'Hence,  in  purchasing  a  knife,  I  pay  for 
them  all,  and  as  willingly  for  one  as  the  other. 

3.  Hence  we  see  how  incorrect  is  the  notion  some- 
times advanced,  that  all  wealth  is  the  production  of  one 
or  of  two,  and  not  of  all  these  forms  of  human  industry. 
All  these  changes  must  be  effected  in  almost  every  arti- 
cle which  we  consume,  and  if  either  of  them  were  to  bo 
suspended,  our  desires  would  not  be  gratified,  and  the 
other  two  must  also  be  discontinued.  He  who  trans- 
ports flour,  performs  an  act  of  as  essential  importance 
to  the  sustentation  of  the  human  race,  as  he  who  raises 
wheat.  He  who  brings  a  knife  from  Liverpool  to  me, 
performs  a  labor  as  important  to  me,  as  he  who  manu* 
factures  the  knife ;  for,  if  it  were  three  thousand  miles 
off,  it  might,  for  all  the  purposes  for  which  I  want  it,  as 
well  not  be  m  existence.  And  yet  more,  if  one  of  these 
forms  of  labor  should  cease,  the  others  must  soon  cease 


46  THE    OBJECTS    OF    HUMAN    INDUSTRY. 

with  it.  Of  what  value  would  wheat  or  wool  be  to  the 
farmer,  if  they  could  not  be  transported  from  his  farm  ? 
And  again :  what  gain  could  be  derived  from  either, 
if  there  were  no  means  of  grinding  the  one,  or  of  manu- 
facturing the  other  ?  Hence  we  see  that  all  the  forms 
of  industry  mutually  support,  and  are  supported  by,  eacl: 
other ;  and  hence,  also,  we  see  that  any  jealousy  be- 
tween different  classes  of  producers,  or  any  desire  on 
the  one  part,  to  obtain  special  advantages  over  the  other, 
are  unwise,  and,  in  the  end,  self-destructive.  The  fact 
is,  that  if  left  to  themselves,  they  all  flourish,  and  they 
all  suffer  together.  Nor  can  either  one  be  depressed, 
for  any  considerable  period,  without  injuriously  affecting 
both  the  others. 

These  various  forms  of  human  industry  enter,  in 
different  degrees,  into  the  value  of  different  articles  of 
use.  For  instance,  butchers'  meat  and  green  vegetables 
derive  almost  their  whole  value  from  the  first  kind  of 
labor,  as  they  require  very  httle  modification,  and  will 
bear  but  short  transportation.  On  the  contrary,  salted 
provisions  may  derive  a  large  portion  of  their  value  from 
change  of  place.  Clothing,  cutlery,  and  what  are  com- 
monly denominated  manufactures,  derive  the  greater 
portion  of  their  value  from  change  in  the  aggregate 
form.  The  original  material  constitutes,  in  general,  but 
a  small  part  of  their  price,  and,  not  being  of  great  bulk, 
their  transportation  is  not  very  expensive.  The  steel 
that  would  make  a  pair  of  razors,  and  the  cost  of  trans- 
porting them  from  Sheffield  or  Paris  to  New  York, 
would  form  but  a  very  small  portion  of  their  price. 
On  the  contrary,  bulky  articles,  such  as  coal  and  iron, 
derive  a  very  large  portion  of  their  cost  from  transpor- 
tation. Coal,  that  has  scarcely  any  exchangeable  value 
in  the  coal  mines  of  Pennsylvania,  is  sold  for  eight  or 
ten  dollars  a  ton  in  Providence.  And  all  the  labor  em- 
ployed upon  it,  is  that  which  is  necessary  for  breaking  it 
in  pieces,  and  removing  it  from  its  bed  to  the  house  of 
the  consumer. 

As,  however,  the  human  race  is  scattered  over  the 
face  of  the  globe,  and  as  their  wants  in  all  latitudes  are' 


THE    OBJECTS    OF    HUMAN    INDUMRY.  4? 

30  nearly  the  same,  while  no  country  affords  facilities 
for  supplying  more  than  a  very  small  number  of  these 
wants,  it  is  evident  that  the  labor  employed  in  change  of 
place  must,  in  civilized  countries,  be  most  universal,  and 
must  enter  essentially  into  the  greatest  number  _jf  com- 
modities. Of  this  every  one  will  be  convinced,  who 
will  take  any  article  of  dress,  of  furniture  or  of  food, 
and  consider  the  amount  of  transportation  that  has  (sn* 
tered  into  its  production  ;  and,  specially,  if  he  take  into 
account  the  transportation  which  has  entered  into  the 
formation  of  the  instruments,  by  which  it  had  been  pro- 
duced. The  same  truth  is  also  illustrated  by  the  fact, 
that  whole  nations,  with  very  small  natural  advantages, 
as  Holland  and  Venice,  have,  in  a  short  period,  become 
immensely  rich,  merely  by  conferring  change  of  place 
on  the  merchandise  and  productions  used  by  other  na- 
tions. Water  communication,  in  the  early  stages  of  so- 
ciety, greatly  diminishes  the  cost  of  transportation,  and, 
of  course,  increases  the  facilities  of  exchange.  It  is  on 
this  account  that  the  first  settlements  of  nations  are  al- 
ways either  on  the  shores  of  the  ocean,  or  along  the 
banks  of  navigable  rivers. 

It  may  also  be  worthy  of  remark,  that,  thus  far,  in 
the  progress  of  society,  the  ingenuity  of  man  has  beeq 
more  successful  in  devising  means  for  increasing  the  pro- 
ductiveness of  labor  in  the  second  and  third;  than  in  the 
first  kind  of  human  industry.  Improved  agricultural 
utensils,  a  better  knowledge  of  the  nature  of  soils,  and 
of  the  different  kinds  of  grain  and  edible  vegetables, 
and  of  manures  have  added  considerably  to  the  quantity 
of  product  that  can  be  raised  by  a  given  amount  of  la- 
bor. But  this  increase  bears  no  sort  of  proportion  to 
that  effected  by  the  use  of  the  machinery  in  the  case  of 
the  cotton  manufacturer,  and  by  the  use  if  the  locomo- 
tive and  many  other  forces.  It  is,  doubtless,  wisely 
ordered  that  it  should  be  so.  Agricultural  labor  is  the 
most  healthy  employment,  and  is  attended  by  the  fewest 
temptations.  It  has,  therefore,  seemed  to  be  the  will 
of  the  Creator  that  a  large  portion  of  the  human  race 
ihoMld    always    be    thus    employed,  and   that,  wha'tever 


48  THE    OBJECTS    OF    HUMAN    INDUSTRY. 

eflects  may  result  from  social  improvement,  llie  propoi 
lion  of  men  required  for  tilling  the  earth  should  never  bci 
essentially  diminished.  It  is  also  to  be  remarked,  that 
division  of  labor,  which  so  greatly  increases  the  produc 
liveness  of  human  industry  in  the  other  modes  of  pro 
duction,  can  be  applied  but  in  a  small  degree  to  agri- 
culture. No  man  can  devote  himself  exclusively  to 
ploughing,  sowing,  or  reaping  ;  because  only  a  small 
part  of  the  year  can  he  employed  in  either  of  these  oc  • 
cupations;  The  farmer  must,  therefore,  practise  them 
all,  at  different  times  ;  and,  of  course,  every  farmer 
must  be  able  to  perform  not  one,  but  all  the  several 
operations  required  in  his  trade.  This  forms  another 
reason  why  the  increase  of  productiveness  of  human 
industry,  in  this  department  of  labor,  has  not  kept  pace 
with  that  which  has  been  witnessed  in  manufactures  and 
commerce. 


SECTION   II. 

THE    DIFFERENT    FORMS    OF    HUMAN    INDUSTRY. 

Industry  is  any  form  of  human  exertion  employed  in 
the  creation  of  value.  This,  of  course,  includes  exer- 
tion, both  of  body  and  of  mind. 

The  object  of  industry,  as  we  have  seen,  is  to  pro- 
duce change  of  some  sort  ;  since  change  is  necessary, 
either  to  the  creation  or  to  the  increase  of  intrinsic 
value,  and  is  always  necessary  to  the  existence  of  ex- 
changeable value. 

We  have  also  seen  that  all  the  changes  which  human 
industry  can  effect  in  matter,  may  be  reduced  to  threes 
namely  :  Change  in  elementary  form  ;  change  in  aggre- 
gate form  ;  and  change  in  place. 

But  when  man  puts  forth  exertion  to  effect  change,  it 
is  not  any  change  at  random,  but  some  specific  change 
which  he  has  directly  in  view.  Were  it  otherwise,  his 
labc^r  would  be  worse  than  useless,  and,  Uke  the  effoir 


THK     FORMS     OF    HUMAN    INDUSTRY.  49 

of  a  maniac  or  an  idiot,  would,  in  nine  times  out  of  ten, 
destroy,  instead  of  creating  value. 

It  is  also  evident,  that  the  changes  which  can  be  ef- 
fected in  matter,  are  not  produced  at  random,  but  in 
obedience  to  certain  laws.  If  we  wish  to  kindle  a  fire, 
it  is  not  any  kind  of  effort  that  will  do  it,  but  effort  ex- 
erted in  obedience  to  the  laws  of  combustion.  If  \ve 
wish  to  raise  wheat,  it  is  not  every  kind  of  labor  that 
w  ill  do  it,  but  labor  exerted  in  obedience  to  the  laws  of 
vegetation.  And  so,  in  general,  if  we  wish  to  efiljct 
either  of  the  three  kinds  of  change  mentioned  above,  we 
must  act  in  obedience  to  those  laws  of  the  Creator,  to 
which  this  kind  of  change  has  been  subjected. 

Again  :  Supposing  the  laws  of  nature,  in  respect  lp_ 
a  particular  change  to  be  known,  it  is  also  necessary  to 
know,  the  manner  in  which  they  may  most  successfully 
be  applied  to  the  accomplishment  of  a  particular  result. 
The  laws  of  combustion  and  of  gravitation  may  be  known, 
and  yet  a  very  important  effort  of  human  ingenuity  may 
be  required,  before  we  ascertain  the  best  method  of  so 
applying  them  as  to  be  able  to  construct  a  good  fire 
place.  The  expansive  power  of  steam  was  known  long 
before  a  steam  engine  was  invented  ;  and  still  longer  be- 
fore any  application  of  it  was  devised  by  which  it  might 
oe  used  for  propelling  vessels  through  the  water.  And 
still  further,  a  man  may  understand  the  general  laws  of 
physiology,  and  yet  be  unable  to  apply  them  to  the  cure 
of  diseases.  A  man  may  understand  the  general  prin- 
ciples of  jurispmdence,  and  yet  not  know  how  to  avail 
himself  of  them,  in  such  a  manner  as  to  procure  either 
defence  from  injury,  or  redress  of  grievance. 

But  suppose  this  also  to  be  k-nown  :  it  still  remains 
for  us  to  put  those  means  into  operation,  by  which,  in 
obedience  to  the  laws  of  nature,  a  given  result  may  be 
Nccomplished.  He  who  understands  the  laws  of  com- 
bustion and  gravitation,  and  the  mode  of  their  applica 
lion,  may  now  set  himself  to  work,  according  to  these 
laws,  and  huiJ!!  a  chimney,  llo  who  understands  the 
laws  of  hydrostatics,  and  the  mode  of  their  application, 
maj  now  set  himself  to  work  to  build  a  boat.  It  is,  howev- 


50  THE    FORMS    OF    HUMAN    INDUiTRY. 

er,  true  that  there  would  still  be  required  a  certa  n  degree 
pf  skill  and  dexterity,  before  he  could  perform  either  of 
these  operations  well ;  although  he  now  could  perforin 
them,  in  some  way  or  other.  This  skill  can  be  ac- 
quired only  by  practice  ;  and  the  power  of  acquiring  it 
is,  in  general,  very  universally  bestowed  upon  men. 

From  what  has  been  said,  it  is   evident  that  the  'n« 
dustry  of  which  man  is  capable,  may  assume  three  dif- 
fc-rent  forms,  namely  :    Industry  of  discovery  or  invt^ti 
Ration  ;    Industry  of  application  or  invention  ;  and   In- 
dustry of  operation. 

1.  Industry  of  Discovery  or  Investigation.  Under 
this  class  of  laborers,  are  to  be  comprehended  those 
who  discover  the  laws  of  nature,  and  those  who  make 
them  known  to  mankind,  after  they  have  been  discov- 
ered. Newton  labored  in  this  department,  when  he 
discovered  the  laws  of  gravitation,  optics,  and  of  the 
motions  of  the  heavenly  bodies  ;  Franklin,  when  he  dis- 
covered the  laws  of  electricity ;  and  .Sir  Humphrey 
Davy,  when  he  discovered  the  alkaline  bases,  and  the 
laws  of  their  combination.  The  labor  of  each  of  these 
men  was  also  of  the  same  kind,  when  they  made  knov^n 
these  laws  to  the  public.  The  labor  of  those  who  are 
called  philosophers.,  belongs  to  this  class. 

2.  Industry  of  Invention  or  Jlpplication.  It  is  very 
rarely  that  a  simple  law  can  be  of  any  use,  without  some 
adjustment  by  which  we  may  avail  ourselves  of  its  ad- 
vantages. Hence,  a  very  important  department  of  hu- 
man industry  is  that  which  teaches  us  how  to  make  the 
a|)plication  of  the  principle,  so  as  to  accomplish  a  par- 
ticular purpose.  Newton  performed  this  labor  when  he 
invented  the  telescope  ;  Hadley,  when,  by  means  of  the 
quadrant,  he  applied  the  laws  of  light  to  the  measure 
ment  of  angles  ;  Franklin,  when  he  invented  the  con- 
ductor, or  lightning  rod  ;  Sir  Humph/ey  Davy,  when  he 
Invented  the  safety  lamp  ;  and  Fulton,  when  he  invented 
that  modification  of  the  steam  engine,  by  which  vessels 
maj  be  propelled  through  the  water. 

Under  this  class,  I  think,  may  also  be  comprehended 
professional  laboT,  generally.     The  business  of  the  cler- 


THE    FORMb    OF    HUMAN    INDUSTRY.  51 

gyman  is  to  teach  us  in  what  manner  we  may  avail  our- 
selves of  the  moral  laws  of  the  Creator.  Tlie  lawyer 
teaches  us  how  to  avail' ourselves  of  the  laws  of  that 
civil  society,  of  which  we  are  the  members.  The  phy-" 
sician  teaches  us  how  to  obey  the  physiological  laws 
under  which  we  are  created,  so  that  we  may  be  relieved 
from  sickness,  or  preserved  in  health. 

3.  To  the  third  class  of  human  industry  belong  all 
(hose  who  put  forth  the  physical  effort  necessary,  in  or- 
der to  create  the  values  desired.  They  are  the  laborers 
who  produce  those  changes,  either  in  elementary  form, 
m  aggregate  form,  or  in  place,  of  which  we  have  al- 
ready spoken,  and  they  compose  by  far  the  most  numer- 
ous class  of  society. 

It  may  here  be  remarked,  that  two  of  these  forms  ol 
labor  are  frequently  performed  by  the  same  person. 
For  instance,  he  who  discovers  a  law  sometimes  also 
teaches  us  how  to  apply  it.  Thus,  as  we  have  already 
shown,  Sir  Isaac  Newton,  Franklin,  and  Sir  Humphrey 
Davy,  were  both  discoverers  and  inventors  ;  that  is,  they 
j)erformed  both  the  first  and  second  kinds  of  industry. 
Thus,  tlie  second  and  the  third  are  also  frequeiitly 
united  ;  that  is,  the  individual  who  labors  at  a  particular 
operation,  also  invents  some  machine  by  which  a  partic- 
ular process  in  that  operation  is  improved.  Thus,  Sir 
Richard  Arkwright,  a  mechanic,  invented  th'3  spinning 
machinery  now  in  common  use  ;  and,  in  general,  many 
of  our  most  important  inventions  have  been  made  by  op- 
erative laborers.  And  there  can  be  no  doubt  that,  if  a' 
knowledge  of  the  laws  of  nature  were  more  generally 
jlifTused  throughout  this  class  of  society,  the  progress  of 
invention  would  be  inconceivably  more  rapid.  I  know 
of  nothing  which  would  tend  so  directly  to  the  general 
iin|  rovcnient  of  the  useful  arts,  as  a  wide  difi'usion  of 
the  knowledge  of  principles  among  those  whose  business 
It  is  to  employ  those  principles  in  their  daily  avocations. 

Although  1  have  arranged  the  several  forms  of  human 
Iiidiistjy  in  the  above  order,  I  by  no  means  assert  that 
this  is  the  order  in  which  they  actually  arise  among  men. 
The  reverse  is,  on  the  contrary,  far  more  commonly  the 


52  THE    PROnUCTS    OF    IIU.MAN    lNDL'«TRr. 

fact.  Men  commence  by  creating,  at  first,  the  siniplosi 
forms  of  value,  and  those  absolutely  necessary  to  their 
^actual  existence.  Still,  in  order  to  create  these  vahies, 
with  certainty  and  with  regularity,  they  must  very  soon 
have  discovered,  by  experiment,  some  rules  by  which 
the  process  must  be  conducted.  Men  would  very  soon 
discover  that  stones  would  not  ignite,  and  that  a  fire 
could  not  be  kindled  in  a  pool  of  water.  As  they  ad 
vanced,  by  successive  experiments,  they  invented  tools, 
by  which,  without  knowing  why,  they  found  themselves 
able  to  accomplish  their  purposes  with  less  labor  and 
with  greater  success.  Thus,  a  man  would  construct  a 
raft  to  transport  himself  and  his  property  over  a  river, 
before  he  knew  any  thing  of  the  laws  of  hydrostatics  ; 
and  he  would  employ  a  wedgg,  before  he  understood 
the  doctrine  of  forces.  The  last  labor  required,  is  to 
ascertain  the  laws  by  which  these  changes  are  governed. 
As  soon  as  this  is  done,  a  great  improvement  is  at  once 
effected  in  all  the  former  inventions  ;  and  new  inven- 
tions arise,  which  otherwise  would  never  have  been  sug- 
gested. Thus,  a  knowledge  of  the  laws  of  combustion 
has  greatly  improved  the  construction  of  instruments  for 
warming  our  houses.  A  knowledge  of  the  lav/s  of  hy- 
drostatics has  greatly  improved  the  construction  of  ships. 
And  a  knowledge  of  the  laws  of  steam  has  given  birth 
to  all  the  machinery  connected  with  the  steam  engine. 
And,  it  seems  not  too  much  to  hope  for,  that  the  knowl- 
edge of  the  laws  of  nature  will  be  yet  so  universally  dif- 
fused, that  invention  shall  almost  cease  to  be  the  work 
of  accident  ;  but,  that,  when  an  instrument  is  wanted, 
men  will  proceed  to  discover  the  law,  and  invent  the 
application,  just  as  Sir  Humphrey  Davy  proceeded, 
when  he  was  requested  to  invent  the  safety  lamp. 

OP    THE    DIFPERENT    PRODUCTS  OF    THE    VARIOUS 
FORMS    OP    INDUSTRY. 

1.  The  product  of  operative  industry,  is  a  change  of 
form  or  of  place  in  matter,  by  which  its  mtrinsic  and 
exchangeable  value  is  inceased.     As  the  exertion  of 


THE    PRODUCTS    OF    HUMAN    INDUSTRY.  53 

(his  labor  confers  its  value,  it  gives  to  the  laborer  a  right 
either  to  the  whole,  or  to  an  equitable  part  of  the  mat- 
ter on  which  it  is  exerted.  Tliis  right  is  easily  ascer- 
tained and  enforced  ;  for  the  laborer  may  enforce  it,  by 
seizing  either  on  the  matter  itself,  or  on  such  part  of  it 
as  may  be  sufficient  to  sa.isfy  his  demand. 

2.  The  change,  which  is  thus  produced,  could  not  Lc 
efl'ccted  by  a  less  amount  of  labor,  than  that  which  the 
laborer  has  exerted  If  a  man  make  a  table  with  suit- 
able skill,  such  a  table  could  not  be  made  by  any  one 
else  with  a  less  degree  of  skill  and  a  smaller  amount  of 
labor ;  and  hence,  the  cost  of  tables  must,  in  the  same 
place,  and  at  the  same  time,  be  very  much  the  same. 
Besides  this,  there  is  no  power  in  tables  to  multiply 
themselves.  Hence,  the  laborers  in  this  or  any  other 
department,  have  a  sort  of  monopoly  of  this  kind  of 
pioduction,  inasmuch  as  no  one  can  produce  it  cheaper, 
and  none  but  themselves  can  produce  it  as  cheap. 

But  all  this  is  reversed,  in  the  case  of  the  first  two 
kinds  of  labor.     For, 

1.  The  product  which  the  discoverer  or  mventor 
creates  is  immaterial.  It  is  knoicledge^  or  a  change  ef- 
fected on  mind,  the  immaterial  part  of  man.  By  cre- 
ating this  change,  a  man  does  not  acquire  a  right  to  thu 
whole,  or  to  any  part  of  the  substance,  in  which  the 
value  resides.  The  substance  cannot  be  appropriated, 
nor  can  it  be  divided  ;  and,  were  this  possible,  the  la- 
borer  could  make  no  use  of  it.  Nor  is  the  chang«» 
one  which  is  cognizable  by  the  senses  of  others,  bul 
only  by  the  consciousness  of  the  person  in  whom  it 
is  wrought.  Hence,  this  marks  a  broad  distinction  be- 
tween this  and  the  other  forms  of  labor. 

2.  Although  the  discovery  of  the  laws  by  which  tlifi 
changes  in  matter  are  governed,  may  requiie  the  exer- 
cise of  the  most  unusual  talent,  and  may  demand  both 
protracted  and  most  expensive  labor  ;  yet  these  laws 
may  be  promulgated,  aUer  they  are  discovered,  by  men 
of  the  most  ordinary  talent.  If  a  man  discover  a  law 
and  reveal  it  to  his  neighbor,  that  is,  create  this  ciiange 
m  his  mind,  his  neighbor  may  create  tlu;  same  prodiK't 

6* 


.51      THE  PRODUCTS  OF  HUMAN  INDUSTRY. 

in  an  hour,  in  the  minds  of  a  thousand  persons,  and  each 
one  of  these  in  the  minds  of  a  thousand  n)ore.  And 
specially,  by  means  of  the  press,  this  power  is  multi- 
plied indefinitely.  There  is  therefore  no  ratio  between 
the  labor  or  skill  necessary  to  create  it,  and  that  ne 
cessary  to  promulgate  it  after  it  has  been  discovered. 
Hence,  he  who  first  creates  knowledge,  has  no  means  ol 
monopolizing  it ;  nor  can  the  exchangeable  value  be  sus* 
tiiined,  b)  the  consideration  that  no  one  could  create  it, 
afterwards,  with  less. labor.  Hence,  as  the  supply  of 
the  product  can  at  any  moment  be  illimitably  increased, 
it  very  soon  ceases  to  have  any  exchangeable  value. 

From  these  reasons  it  will  be  seen,  that  the  ordinary 
rules  of  supply  and  demand,  and  cost  and  labor,  do  not 
enter  into  view,  when  we  speak  of  intellectual  products. 
They  can  therefore  rarely  be  adjusted  by  any  fixed  rule. 
Nevertheless  as  immaterial  products  are  of  the  greatest 
importance  to  the  prosperity  of  a  country,  the  Political 
Economist  may  point  out  the  circumstances  most  favor- 
able to  their  production,  and  the  rule  by  which  tiiose 
who  produce  them  should  be  remunerated.  The  above 
considerations  are  suggested,  in  order  to  explain,  why 
Political  Economy,  so  commonly,  treats  almost  exclu- 
sively of  material  products. 

It  may,  however,  be  remarked,  that  civil  society  ob- 
serving that  immaterial  products  are  necessary  to  the 
well  being  of  a  community,  and  that  those  who  create 
fhem,  are  liable  to  remain  altogether  unpaid  ;  has  fre- 
quently devised  means  by  which  some  remuneration  may 
be  reaped  from  the  exercise  of  this  kind  of  industry. 
Such  are  the  laws  of  copy,  and  of  patent  right.  By 
(he  first  of  these,  an  author  is  allowed,  for  a  limited 
lime,  the  exclusive  control  over  the  publication  of  his 
work  ;  and  by  the  other,  the  inventor  is  entitled  to  the 
exclusive  control  over  the  use  of  his  invention.  In  this 
manner,  both  of  these  classes  of  laborers  are  enabled  tr 
derive  some  portion  of  benefit  from  their  production?. 
Were  it  otherwise,  all  their  reward  would  consist  m 
whatever  of  consideration  tliey  might  obttiin  in  the  com- 
oumity,  and  in  the  gratification  of  benevolence  from  the 


THE     PKODL'CTS    OF    HUMAN    INDUSTRF.  56 

consciousness  of  liaving  improved  the  condition  of  theii 
fellows.  But,  inasmuch  as  every  other  man,  who  is 
usefully  employed,  obtains  these  rewards  also,  and  re- 
ceives pecuniary  advantage  in  addition,  there  is  no  rea- 
son why  the  intellectual  laborer  should  receive  only  the 
Qrst,  and  be  excluded  altogether  from  the  second. 

From  what  has  been  said,  another  diffeience  between 
llese  two  forms  of  product  may  be  seen.  The  product 
o(  operative  labor,  being  united  with  matter,  and  being 
limited  in  quantity  and  fixed  in  cost,  may  be  exported 
to  another  country,  and  will  command  a  correspondent 
amount  of  exchangeable  value  in  the  products  of  that 
country.  Hence,  a  nation  may  ^rovv  rich,  either  by 
agriculture,  manufactures,  or  commerce.  But  this  is 
not  the  case  with  immaterial  products.  We  cannot  send 
abroad  a  given  amount  of  knowledge,  and  bring  back  a 
correspondent  amount  of  material  products.  The  small- 
est amount  of  knowledge,  is  capable  of  such  indefinite 
multiplication,  that  the  demand  may  be  instantly  supplied. 
Hence,  a  society  composed  sole}y  of*philosophers,  or 
inventors,  or  professional  men,  would  never  grow  rich, 
but  must,  if  it  performed  no  other  labor,  of  necessity 
starve.  Laborers  of  this  class  add  greatly  to  the  value 
of  other  labor,  though  their  product,  if  no  other  were 
created,  would  be  valueless  in  exchange.  They  may 
be  compared  to  the  steam  in  an  engine,  which,  when  it 
IS  combined  with  proper  machinery,  produces  the  most 
surprising  results,  but  which,  when  left  to  itself,  is  dissi- 
pated into  air.  On  the  other  hand,  the  separate  parts 
of  the  machinery,  though  they  might  be  of  some  use  as 
raw  material,  yet,  if  the  steatn  were  withdrawn,  would, 
immediately,  become  a  mere  mass  of  cumbersome  aiiri 
laluoless  lumber. 

'I'hus,  we  see  that  all  the  cksses  of  laborers  are  mu- 
tually necessary  to  each  other.  Without  a  knowledge 
of  the  laws  of  nature,  we  should  all  be  savages.  With- 
out the  skill  and  labor  of  the  mechanic,  there  woulil 
neither  exist  the  opportunity  of  artpiiring  knowledge, 
nor  would  our  knowledge,  if  acquired,  be  of  any  pracii- 
cal  value.     Nothing  can,  therefore,  be  more  unreasons- 


56  INCREASE    OF    PRODUCTIVENESS. 

ble  than  the  prejudices  wliich  sometimes  exist  between 
these  different  classes  of  laborers,  and  nothing  can  be 
more  beautiful,  than  their  harmonious  co-operation  in 
every  effort  to  increase  production,  and  thus  add  to  liie 
conveniences  and  happiness  of  man. 


PART   II. 


THE   MODES    BY  WHICH    THE    PRODUCTIVENESS    OF 
HUMAN   INDUSTRY   MAY   BE   INCREASED. 

It  is  obvious,  that  if  the  capital  and  number  of  labor- 
ers be  at  any  one  period  the  same,  the  annual  amount  of 
product  created  will  be  as  the  amount  of  industry  ex- 
erted. Were  the  laborers  all  sickly,  so  that  they  could 
work  only  for  fo«r  hours  a  day,  there  would  be  but  half 
as  large  a  product  created,  as  if  they  all  labored  for 
eight  hours  a  day.  If,  by  a  palsy,  they  were  all  de- 
prived of  the  use  of  one  of  their  arms,  a  correspondent 
decrease  of  production  must  ensue.  On  the  contrary, 
if,  while  the  cost  of  their  support  remained  the  same, 
their  ordinary  power  of  labor  could  be  doubled,  theie 
would  be  twice  the  usual  amount  of  value  created.  And 
hence,  in  general,  we  see  that,  other  things  being  equal, 
just  in  proportion  as  more  labor  is  bestowed,  the  de- 
sires of  every  one  are  more  fully  gratified,  that  is,  he 
E;rows  richer  ;  and,  on  the  contrary,  as  labor  is  dimin- 
i:.iied,  the  laborer  suffers,  or  grows  poorer.  'I'his  result 
every  one  witnesses  every  day.  Sick,  aged,  and  idle 
people  suffer,  because  they  either  do  not,  or  cannot,  be- 
stow the  labor  upon  capital  necessary  to  create  an 
amount  of  product  sufficient  for  their  subsistence. 

But  the  physical  power  of  man  is  extremely  limited. 
There  is  an  average  amount  of  fatigue  which  a  human 
being  can  undergo^  which  can  rarely,  and  but  for  veiy 
short  periods,  be  exceeded.     If  he  be  worked  too  hard, 


INCRF.ASE    OF    PRODI  CTIVENESS.  f>7 

de  sickens  and  dies  ;  and  dies  probably  from  being  over- 
worked more  readily  and  more  commonly  than  any  other 
animal.  When,  therefore,  the  whole  physical  power  of 
man  is  employed  upon  the  capital  which  h(?  possesses, 
this  may  be  considered  the  natural  limit  of  human  pro- 
ductiveness. 

1 .  Bui  it  is  evident,  that  if  by  any  means  we  could 
inciease  this  power  ten-fold,  there  would  be  a  ten-fold 
increase  of  production.  If  we  could,  by  jjny  means, 
enable  a  man,  with  one  day's  labor,  to  execute  as  much 
change  in  capital  as  lie  could  before  execute  with  ten 
days'  labor,  there  would  be  just  ten  times  as  many 
changes  effected  ;  that  is,  ten  times  as  much  value  creat- 
ed, and  ten  times  as  much  product  to  be  either  enjoyed 
l^'  himself,  or  to  be  exchanged  for  equivalent  means  of 
happiness.  And,  if  the  power  of  effecting  changes  be 
increased  ui  other  men  in  the  san]§  ratio,  the  product  of 
the  whole  society  will  be  increased  in  the  same  propor- 
tion. This  is  one  of  the  effects  produced  by  the  use  of 
natural  agents  ;  and  hence  it  is,  that,  jtost  in  proportion 
as  they  are  used,  the  condition  of  man  is  annually  and 
rapidly  improved. 

2.  But  this  is  not  all.  There  are  many  values  which 
are  necessary  to  the  happiness  and  even  to  the  existence 
of  man,  which  he  could  not  create  by  his  unassisted 
powers.  Thus,  he  needs  shelter,  cooked  food,  and 
clothing.  But  he  could  not,  with  his  teeth  and  nails, 
cut  down  a  tree  and  fashion  it  into  a  cabin.  He  cannot, 
by  his  hands,  either  cook  his  food,  or  manufacture  a  fab- 
ric suitable  for  clothing.  All  these  can,  however,  be 
done  by  other  agents  which  he«can  command  and  control. 
Thus,  it  on  can  be  made  to  cut  down  and  fashion  a  tree, 
fire  to  cook  his  food,  and  a  spinning  wheel  and  loom  can 
be  made  to  furnish  him  with  clothing.  Thus  we  disco  er 
the  second  use  of  natural  agents.  They  enable  him  to 
create  values  necessary  to  his  existence,  which,  without 
their  aid,  could  never  be  produced.  In  this  manner,  an 
additional  power  for  the  creation  of  product  is  given  to 

-human  industry. 

3.  But  this  is  not  all.     It  is  found  that  a  man,  hy  de* 


58         MODES    BY    WHICH    THE    PRODUCTIVENESS 

roting  himself  to  one  particular  pursuit,  is  able  to  create 
a  vastly  greater  amount  of  product  in  a  given  time,  than 
he  could  create  if  he  devoted  himself  to  several  pursuits. 
Hence,  if  there  are  ten  products  to  be  created,  by  ten 
men,  they  will  in  a  given  time  create  a  vastly  greater 
amount,  if  each  man  labors  entirely  upon  one,  than  if 
each  man  labors  upon  them  all.  The  product  of  the 
whole  ten,  therefore,  by  such  a  division  of  labor,  will  be 
greatly  aug|;aented.  This  is  the  third  method  by  which 
the  productiveness  of  human  industry  may  be  increased. 

We  see,  then,  the  modes  in  which  the  productive 
power  of  man  ma)  be  exerted.  1.  Man  may,  unassist- 
ed, labor  to  the  extent  of  his  physical  ability.  2.  He 
may  multiply  his  power,  by  availing  himself  of  the  agents 
of  nature,  either  to  facilitate  the  creation  of  products, 
or  to  create  products  which  he  could  not  create  himself; 
or,  3d.  He  may  economize  his  labor,  by  such  arrange- 
ments as  will  enable  him,  in  a  given  time  and  with  a  giv- 
en amount  of  fatigue,  to  accomplish  a  greater  amount  of 
production. 

It  is,  by  adopting  these  means,  that  the  human  race 
advances  from  the  savage  to  the  civilized  state.  With 
nothing  but  his  hands  and  feet,  man  could  not  subsist, 
except  in  the  most  temperate  climates.  His  food  would 
be  wild  fruits,  and  the  animals  which  he  could  run  down 
in  the  chase.  This  is  the  lowest  point  of  human  wretch- 
edness. It  is  a  laborious  and  incessant  struggle  to  ob- 
tain the  bare  means  of  prolonging  existence.  He  in- 
vents a  bow  and  arrow  ;  this  is  a  natural  agent,  or  a  tool 
by  which  ha  avails  himself  of  the  elasticity  of  wood. 
By  this  simple  tool,  his  coudition  is  materially  improved 
Still,  he  is  destitute  of  most  of  the  comlorts,  and  fre- 
quently, at  times,  of  the  necessaries  of  life.  Hence,  in 
cold  climates,  great  numbers  of  savages  every  winter 
perish  from  cold  and  famine.  He  next  becomes  a 
shepherd.  Here  he  avails  himself  of  the  use  of  natural 
agents.  The  flocks  furnish  him  with  wool,  and  tiie 
herds  with  milk.  He  now  begins  to  taste  the  blessings 
of  a  regular  and  sufficient  supply  of  food  and  clothing. 
tie  next  becomes  an  agriculturist.     Here,  in   addition 


OF    HUMAN    INDUSTRY    MAY    BE     INCREASED         59 

lo  the  agents  formerly  employed,  he  makes  use  of  the 
earth,  manures,  and  implements,  and  begins  rapidly  to 
accumniate  capital.  His  wants  increase,  and  a  division 
j)(  labor  is  necessary  to  supply  them.  He  now  advances 
with  rapid  progress,  and  at  every  step  employs  either 
new  agents,  or  else  old  agents  more  successfully,  divides 
his  labor  more  skilfully,  and  at  length  arrives  at  all  the 
blessings  of  mature  civilization. 

If  it  be  asked,  how  far  may  this  increased  productive' 
ness  of  human  mdustry  be  carried,  we  answer,  it  is  im- 
possible to  tell,  unless  we  can  ascertain  how  great  are 
the  blessings  which  God  has  in  reserve  for  man.  Who 
can  estimate  the  benefits  conferred  on  man  by  the  mag- 
net, or  by  steam,  or  by  the  printing  press  ?  And  what 
reason  have  we  to  suppose  that  the  gifts  of  God  are 
exhausted,  or  that  there  are  not  other  and  more  excellent 
natural  agents  yet  to  be  discovered,  or  other  modes  of 
using  those  which  we  are  already  acquainted  with,  that 
shall  produce  even  more  surprising  results  than  any  which 
we  have  yet  witnessed  ?  Before  the  discovery  of  the 
agents  now  in  use,  the  most  vivid  imagination  could  never 
have  conceived  of  the  benefits  which  they  have  already 
conferred  upon  society.  There  is  no  reason  to  suppose, 
that  we  are  now  more  capable  of  fathoming  the  goodness 
ol  God,  than  our  ancestors  were  three  or  four  hundred 
years  ago. 

And  hence  we  learn  the  inconceivable  importance  to 
a  nation,  of  science,  and  of  the  labors  of  those  who  are 
devoted  to  the  discovery  of  the  laws  of  nature,  and  to 
the  invention  of  new  modes  of  applying  these  laws  to 
the  service  of  man.  What  would  be  the  condition  ol 
the  world  at  the  present  moment,  if  the  knowledge  of 
navigation  and  magnetism,  and  of  the  laws  of  chemiatiy 
were  abolished  ?  Undiscovered  knowledge  is  just  as  rich 
in  the  means  of  human  happiness,  as  discovered  knowl- 
edge. And  hence,  that  nation  which  is  most  assiduously 
cherishing  the  means  for  availing  itself  of  the  benefit  of 
all  the  laws  of  the  Creator,  will  most  rapidly  provide  it- 
self with  the  comforts  and  conveniences  and  luxuries  of 
life    in  the  greatest  abundance  and  at   the  least  possible 


60         THE  i;SE  OF  NATURAL  AGENTS. 

cost.  Who  can  tell  the  benefit  which  will  result  to  thi.-> 
country,  when  Geology  has  revealed  to  us  the  riches 
which  at  present  remain  hidden  from  our  view  beneath 
the  surface  of  the  soil  ? 


SECTION  I. 

OF    THE    USE    OF    NAT.URilL    AGENTS 

We  shall  now  proceed  to  consider  the  several  means 
by  which  the  productive  power  of  industry  may  be  in- 
creased. This  section  will  treat  of  the  use  of  natural 
agents. 

A  natural  agent^  is  any  quality  or  relation  of  things 
which  can  be  used  for  the  purpose  of  assisting  us  in  pro- 
duction. 

Thus,  the  light  and  heat  of  the  sun  are  natural  agents, 
without  the  aid  of  which  we  could  not  create  vegetable 
products. 

Caloric,  or  artificial  heat,  is  a  natural  agent,  without 
which  we  could  neither  cook  our  food,  prolong  our  lives 
in  cold  climates,  give  any  valuable  quality  to  metals,  nor 
create  steam  for  the  purpose  of  machinery.  Magnetism 
is  a  natural  agent,  by  which  we  are  enabled,  in  any  part 
of  the  earth,  to  know  in  what  direction  we  are  moving. 

The  various  powers  and  instincts  of  animals  are  natu- 
ral agents,  by  which  we  accomplish  purposes  which  could 
noi  be  accomplished  without  them.  Thus,  the  farmer 
avails  himself  of  the  muscular  power  and  docility  of  the 
tix  and*  the  horse;  the  huntsman,  of  the  fleetness  and 
scent  of  the  hound,  &c. 

Wind,  the  gravitating  power  of  water,  and  steam,  are 
natural  agents,  by  means  of  which  we  create  the  momen- 
luin  necessary  to  various  operations  in  the  arts. 

Jl  looly  or  a  macfiine,  is  any  combination  of  matter, 
by  means  of  which  we  are  enabled  to  avail  ourselves 
of  the  qualities  or  relations  of  a  natural  agent.     Thus, 


THE  USE  OF  NATURAL  AGENTS.         61 

a  lens,  or  burning  ^lass,  is  a  tool,  by  means  of  whicti 
we  concentrate,  for  useful  purposes,  the  rays  of  the  sun. 

Jl  stove^  or  a  fire  place,  is  an  instrument,  or  tool,  by 
which  we  avail  ourselves  of  the  calorific  properties  of 
fuel. 

^  mariner^s  compass  is  a  tool,  by  which  we  avail 
ourselves  of  the  peculiar  quality  of  the  magnetic  needle. 

t/i  water  wheel  is  a  tool,  by  means  of  which  we  avail 
ourselves  of  the  gravitating  power  of  water. 

Jl  steam  engine  is  a  tool,  by  means  of  which  we  avail 
ourselves  of  the  expansive  power  of  steam. 

The  only  difference  between  a  tool  and  a  machine 
19,  that  the  one  is  more  complicated  than  the  other. 
A  common  hammer  is  a  tool,  by  means  of  which  we 
avail  ourselves  of  the  gravity  and  density  of  iron,  and 
of  the  power  of  the  lever.  A  trip-hammer,  by  which 
large  masses  of  iron  are  fashioned  and  wrought,  is  called 
a  machine,  but  the  principles  employed  are,  in  both 
cases,  the  same,  only  the  trip-hammer  is  moved  by  a 
natural  agent,  water,  or  steam,  while  the  common 
hammer  is  moved  by  the  hand. 

From  what  has  already  been  said,  it  will  be  easily 
perceived,  that  the  qualities  and  relations  of  natural 
agents  are  the  gift  of  God,  and,  being  His  gift,  they 
cost  us  nothing.  Thus,  in  order  to  avail  ourselves  of 
the  momentum  produced  by  a  water-fall,  we  have  only 
to  construct  the  water-wheel  an«l  its  necessary  appen- 
dages, and  place  them  in  a  proper  position.  We  then 
have  the  use  of  the  falling  water,  without  further  ex- 
pense. As,  therefore,  our  only  outlay  is  the  cost  of 
the  instrument  by  which  the  natural  agent  is  rendered 
available,  this  is  the  only  expenditure  which  demands 
the  attention  of  the  political  economist. 

If  we  reflect  upon  the  various  natural  agents  em- 
ployed by  man,  we  shall  see  that  some  of  them  can 
be  used  without  any  tools  whatever.  Such  is  the  case 
in  agricultural  labor,  with  air,  and  the  light  of  the  sun. 
Others  require  only  so  simple  instruments,  that  their 
effect  upon  price  is  not  appreciable.  Thus,  a  mariner's 
conpass,  which  would  last  for  twenty  years,  and  assist 
6 


62  OF    ARENTS    WHICH    CREATE    MOMENTUM. 

in  the  transportation  of  half  as  mai>y  millions'  vahi«  ol 
merchandise,  would  cost  but  a  few  dollars.  Others 
arc  used  by  few  persons,  and  for  particular  and  unusual 
purposes,  as  the  lens,  or  the  microscope.  It  is  only 
those  agents  which  require  for  their  employment, 
machinery  of  which  the  cost  is  appreciable,  and  which 
are  of  so  general  necessity,  that  their  use  enters  into 
consideration  in  estimating  the  expenses  of  production, 
that  require  to  be  specially  noticed  in  Political 
Economy. 

The  means  most  universally  required  for  creating 
change,  is  momentum^  or,  as  it  is  commonly  called, 
power.  Without  this,  in  agriculture,  no  change  in  ele- 
mentary form,  and,  in  mechanics,  no  change  in  aggre- 
gate form,  and  in  transportation,  no  change  in  place, 
can  be  effected.  The  instruments  necessary  to  avail 
ourselves  of  the  natural  agents  which  create  momentum, 
or  which  enable  us  to  use  it  in  particular  methodo, 
are  very  numerous  and  very  costly,  and  form  a  laii',c 
portion  of  the  fixed  capital  of  man.  The  natural  agents 
which  man  uses  for  this  purpose  are,  therefore,  tnose 
which  particularly  claim  our  attention  ;  and  to  these, 
the  remainder  of  this  section  will  be  devoted. 

The  natural  agents  connected  with  the  use  of  mo- 
mentum, may  be  divided  into  two  classes  : 

1.  Those  which  create  momentum. 

2.  Those  which  en«rble  us  to  use  it. 
1.    Of  those  which  create  momentum. 

This  class  of  agents  may  be  subdivided  into  two 
kinds  :      1st.  Animate  ;  and,  2d.   Inanimate. 

1.  Animate,  Tiiese  are,  beasts  of  draft  and  burden, 
generally.  The  most  common  of  these  are,  the  ox,  the 
horse,  and  the  mule  ;  others  in  use  in  particular  dis- 
tricts, are  the  camel,  the  elephant,  the  dog,  and  the 
reindeer. 

The  subjection  of  animals  to  the  human  will  marks 
an  era  in  the  progress  of  civilization  ;  and  teaches  us 
'hat  the  first  important  step  has  been  taken  in  the  im- 
provement of  the  condition  of  man,  and  of  the  produc- 
tiveness   of   human   industry.      The    ox   and  the  horse 


OF    ANIMATE    AGENTS.  63 

have  much  greater  physical  power  than  man.  They 
may  also  be  sustained  at  a  much  less  expense.  Their 
food  is  the  spontaneous  production  of  the  earth,  which, 
for  a  large  part  of  the  year,  they  gather  for  themselves, 
and  which  requires  no  labor  of  preparation.  They 
need  no  clothing  in  any  latitude,  and  in  the  warmer  parts 
of  the  temperate  zone,  need  no  shelter.  But,  in  con- 
sequence of  his  superiority  in  intellectual  endowment, 
man  can  direct  and  govern  the  physical  power  of  several 
of  these  animals,  and,  by  attaching  them  to  agricultural 
machines,  can  command  that  power  at  his  will.  If, 
then,  by  the  use  of  animals,  one  man  can  wield  a  phys- 
ical force  equal  to  that  of  ten  men,  he  will  be  able  to 
produce,  by  the  labor  of  a  day,  ten  times  as  much  as  he 
could  before  the  introduction  of  animate  agents.  He 
will,  therefore,  by  the  same  amount  of  labor,  produce 
ten  limes  as  large  an  amount  of  objects  of  desire  ;  that 
is,  of  means  of  human  happiness.  He  will  have  a 
larger  surplus  to  employ  in  fixed  capital  for  the  next 
year,  and  ibis  surplus  will  be  annually  increasing,  and 
increasing  at  the  rate  of  compound  interest.  He  will 
have  a  larger  portion  to  exchange  ;  hence,  he  will  be 
able,  also,  to  enjoy  a  larger  amount  of  his  neighbor's 
products.  He  will  be  able  to  exchange  with  a  greater 
number  of  producers ;  hence,  he  will  have  a  larger 
number  of  his  desires  gratified.  And  when  once  this 
first  step  has  been  taken,  capital,  unless  destroyed  by 
man's  perverse  moral  dispositions,  must  increase  so 
rapidly,  that  the  mechanical  arts  soon  commence,  and 
permanent  improvements  an^  intellectual  cultivation  will 
follow  in  rapid  succession. 

In  the  earliest  stages  of  society,  animate  power  must 
be  used  for  the  production  of  momentum,  in  all  the 
three  departments  of  human  industry.  In  the  labors  of 
agriculture,  it  is  still  employed,  and  must  probably  be 
thus  employed  forever.  Nothing  has  yet  superseded 
il,  and  there  is  reason  to  doubt  whether  any  thing  ever 
will  supersede  it.  In  this  respect,  therefore,  so  far  as 
the  means  for  the  creation  of  momentum  are  concerned, 
ihe  early  and  the  later  periods  of  society  remain  on  a 


64  OF    INANIMATE    AGENTS. 

level.  The  improvements  that  have  been  made  by  the 
introduction  of  other  creative  forces,  have  generally 
been  connected  with  the  other  modes  of  operative 
industry. 

2.  Of  Inanimate  J^atural  Agents.  The  inanimate 
agents,  most  commonly  in  use,  are  :  The  explosut 
force  of  Gunpowder  ;  Wind;  The  gravitating  p-.uer 
of  Water  ;  and  The  expansice  power  of  Steam. 

1.  Gunpowder  is  used  in  the  blasting  of  rocks,  in* 
hunting,  and  in  war.  Its  value,  in  the  blasting  of  rocks, 
is  very  considerable.  By  drilling  a  small  hole,  which 
may  be  done  by  one  man  in  a  day,  and  by  the  use  of  a 
few  ounces  of  gunpowder,  a  force  may  be  exerted, 
in  an  instant,  producing  an  effect  which,  twenty  men, 
for  several  days,  could  not  otherwise  have  exerted. 
Hence,  it  is  of  very  great  use  in  all  works  of  internal 
improvement,  where  rocks  must  be  removed,  in  order 
to  admit  the  passage  of  railroads  and  canals.  In  fact, 
it  is  doubtful  whether  many  of  the  most  important  of 
these  works  could  ever  have  been  executed,  but  for  this 
agent.  Others,  if  the  execution  of  them  were  possible, 
must  have  been  accomplished  at  so  great  an  expense, 
that  the  investment  of  capital  in  them  would  not  have 
been  profitable,  and,  of  course,  it  would  not  have  been 
made. 

Gunpowder  is  also  used  extensively  in  war.  If  war 
he  beneficial,  or  even  necessary,  gunpowder  is  an  agent 
of  the  utmost  importance  ;  for,  by  no  other  means  yet 
discovered,  is  it  possible  to  destroy  so  many  men,  with 
so  little  physical  suffering,  and  with  so  little  personal 
labor.  It  has  also  a  moral  advantage  over  other  meth- 
ods of  slaughter,  inasmuch  as  the  destruction  of  human 
life,  in  this  manner,  excites  less  sensibly  the  ferocity 
of  the  human  heart.  On  this  account,  wars,  since  its 
introduction,  have  been  conducted  on  more  humane  prin- 
ciples than  formerly.  It  has  also  been  a  valuable  aux- 
iliary to  the  progress  of  civilization,  since  it  has  confer- 
•-ed  on  civilized,  an  undisputed  mastery  over  uncivilized 
nations.  There  has  not  been,  for  centuries,  any  danger 
to  Christendom  from  barbarian  invasion.      Besides,  the 


OF    INANIMATE    AGENTS.  6A 

•nore  eneigetic  are  the  means  of  destruction  in  war,  the 
less  is  the  loss  of  life  in  battle.  Hence,  of  a  given 
number  of  combatf.nts  in  an  engagement,  a  much  smaller 
proportion  is  now  slain  than  formerly.  This  might  al- 
most give  rise  to  the  seemingly  paradoxical  hope,  that 
some  means  of  destruction  might  yet  be  invented,  so 
overwhelming  in  its  effects,  as  to  put  the  smallest  nuin^ 
her  of  men  on  a  level  with  the  greatest,  and  herce  to  put 
an  end  to  wars  altogether. 

2.  Another  agent  used  for  the  creation  of  momeu' 
turn,  is  Wind.  Wind,  as  a  stationary  agent,  is  an  impor- 
tant mechanical  power,  in  countries  destitute  of  water 
pov  er,  or  of  the  fuel  necessary  for  the  production  of 
steam,  or  of  the  capital  which  must  be  invested  in  the 
machinery  required  in  the  use  of  more  expensive  agents. 
Its  principal  advantage  is  its  cheapness.  It  costs  noth- 
ing to  create  it,  and  the  machinery,  by  which  it  is  ap- 
plied, is  simple,  and  easily  constructed. 

The  disadvantages  of  wind,  are  its  uncertainty,  both 
in  quantity  and  in  time,  and  the  difficulty  with  which  it 
is  regulated.  In  consequence  of  the  irregularity  of  its 
force^  it  is  impossible  to  employ  it  in  labor  requiring  del- 
icacy of  operation  :  and,  in  consequence  of  its  uncer- 
tainty in  time,  it  could  not  be  employed  where  the  labor 
of  many  persons  was  dependent  on  its  assistance. 

As  a  locomotive  power,  on  water,  wind  is  almost  uni- 
versally used  in  navigation.  Though  the  direction,  in 
which  it  acts,  is  variable  ;  yet,  nautical  skill  enables  us 
io  use  it  when  blowing  from  almost  any  point  whatever. 
Its  variation,  in  the  quantity  of  force,  is  here  also  a  mat- 
ter of  less  consequence,  since  this  circumstance  can 
affect  the  operation  to  be  performed,  only  in  respect  to 
lime.  And  variation,  even  in  this  respect,  has,  in  a 
great  degree  yielded  to  science  and  enterprise.  It  ia 
astonishing  to  observe  with  what  precision  and  certainty 
voyages  are  now  made  between  New  York  and  Liver- 
pool. Hence,  this  agent  has,  until  lately,  been  univer- 
sally used  in  the  navigation  of  the  ocean.  With  the  in- 
ventions of  Fulton  a  new  era  commenced.  Steam  very 
soon  was  employed  in  the  place  of  wind  in  the  naviga- 


66  OF    INANIMATE    AGENTS. 

tion  of  rivers  and  along  ihe  sea-board.  It  was  not,  how 
ever,  until  the  year  1837  that  the  experimenf  was  suc- 
cessfully made,  of  establishing  a  regular  communication 
between  Europe  and  America  by  means  of  steam.  In 
the  May-  of  that  year,  the  steamers  Sirius  and  Great 
Western,  the  former  from  Liverpool,  the  latter  from 
Bristol,  arrived  in  New  York.  Since  that  time  passages 
have  continued  to  be  made  between  the  above  ports 
with  great  regularity,  and  thus  far  without  disaster  or  ac- 
cident. It  is  demonstrated  that  the  navigation  of  the 
Atlantic,  by  steam,  is  as  perfectly  within  the  power  of 
man,  as  the  navigation  of  the  Thames  or  the  Hudson. 
Steanxprs  are  also  at  present  plying  regularly  from 
France  and  Great  Britain  to  every  part  of  the  Mediter- 
ranean. Steamers  now  leave  Boston  and  Liverpool 
twice  every  month,  and  very  rarely  have  they  failed  to 
arrive  within  twelve  hours  of  their  appointed  time  at  an} 
season  of  the  year. 

3.  Another  agent,  used  for  the  creation  of  momen- 
tum is  the  gravitating  power  of  Water.  This  is  used 
only  as  a  stationary  agent.  Its  advantages  are,  that  it  is 
cheap,  tolerably  constant,  and  frequently,  is  capable  of 
exerting  great  mechanical  force.  Its  disadvantages  are, 
that  it  is  stationary  ;  that  is,  that  it  can  be  used  only  in 
situations  where  it  has  been  created  by  nature.  Hence, 
it  is  frequently  at  a  considerable  distance  from  the  sea- 
ports whence  the  manufacturer  derives  his  supplies,  and 
whence  he  exports  his  products.  In  such  cases,  the 
cost  of  transportation  must  be  deducted  from  the  profits 
of  the  establishment,  and  is  of  course,  to  this  amount,  a 
diminution  of  their  value. 

Water  cannot  always  be  commanded  in  sufficient 
quantity.  Very  few  mill-seats  are  secure  fronti  the  lia- 
bility to  sufler  from  the  want  of  water.  This  is  a  great 
inconvenience,  inasmuch  as,  in  seasons  of  drought,  a 
large  number  of  the  laborers  must  be  unemployed,  and 
a  large  portion  of  the  expenses  of  the  establishment 
must  be  incurred,  without  yielding  any  remuneration  to 
<he  proprietor. 

Another  disadvantage  of  water  power  is,  that  it  is  lia- 


*       OF    INANIMATE    AGENTS.  67 

ble  to  danger  from  inundation.  Though  ihis  may  be 
pnarded  against,  in  many  cases  ;  yet,  it  frequently  can 
be  done  only  at  An  expense  which  greatly  reduces  the 
cheapness  of  the  agent.  Notwithstanding  these  disad- 
«^antages,  water  power  will  probably  be  always  used, 
where  great  mechanical  force  is  required  ;  where  the 
machinery  to  be  employed  is  simple,  and  where  the  op- 
eration does  not  require  the  greatest  possible  nicety  of 
execution. 

4.  The  power,  however,  most  commonly  in  use  ai 
present,  is  Slcam.  Its  advantages  are,  that  it  can  be 
used  to  create  any  required  degree  of  mechanical  force  ; 
that  it  is  perfectly  under  human  control  ;  that  it  may  be 
created  in  any  place  where  fuel  can  be  obtained ;  that  it 
c^n  be  used  at  will,  either  as  a  stationary,  or  a  locomo- 
tive power  ;  and  that  it  can  be  made  to  act  with  perfect 
regularity.  Its  only  disadvantage,  is  its  expensiveness. 
The  machinery  by  which  it  is  generated  is  costly,  and 
requires  frequent  repairs  ;  and  the  fuel,  by  which  it  is 
maintained,  is  a  very  serious  item  of  consumption.  The 
price  of  engines,  however,  will  be  gradually  reduced,  as 
the  demand  for  them  increases.  And  it  is  probable, 
that,  by  improvement  in  their  construction,  the  consump- 
tion of  fuel  will  be  greatly  diminished  ;  while  increased 
facilities  for  transportation  will  materially  reduce  its 
price.  The  .introduction  of  steam  power  has  greatly  re- 
duced the  price  of  fuel  in  Great  Britain. 

The  question  whether  steam  or  water  power  should 
be  used  in  any  particular  case,  is,  I  suppose,  to  be  de- 
cided by  their  relative  expensiveness.  This  will  be  de- 
cided, principally,  by  the  place  in  which  the  power  may 
be  re(juired.  Water  power  will  generally  be  the  cheaper 
where  it  can  be  procured  in  abundance,  and  sufliciently 
near  to  a  market  or  to  tide  water.  But  where  it  is  vari- 
able in  quantity,  or  is  at  a  considerable  distance  from  tlie 
place  of  delivery,  the  cost  of  transportation  will  fre- 
ijueutly  overbalance  its  other  advantages,  and  render 
steam  power  the  more  economical.  Machinery,  pro- 
pelled by  sleam,  can  be  erected  and  carried  on  upon  a 
wharf,  or  in  the  midst  of  a  city  ;  and  hence  it  a\  oids  aU 


98  ANIMATE    AND    INANIMATE    iGE.'^'rS. 

the   cost   of   unnecessary   transportation       Machinery 
propelled  by  water   power,  can   be  erected  only  at  the 
place  where  the  water  power  exists,  and,  of  course,  is 
subject  tc  all  the  expense  of  transportation  between  that 
place  and  the  market. 

The  ADVANTAGES  of  inanimate  over  animate  nat:irai 
agents^  are  several. 

1 .  Inanimate  agents  can,  within  a  small  compass,  and 
with  comparatively  little  weight,  produce  a  vastly  greater 
amount  of  momentum,  than  animate  agents.  Thus,  a 
steam  engine,  of  one  hundred  and  fifty  Or  two  hundred 
horse  power,  occupies  but  a  small  space,  and  forms  but 
a  small  part  of  the  cargo  of  a  vessel.  But  so  great  a 
iiumber  of  horses  could  scarcely  be  carried  in  any  vessel 
designed  to  transport  either  freight  or  passengers  ;  and, 
besides,  no  mechanical  arrangement  has  yet  been  devis- 
ed, by  which  such  a  number  of  animals  could  conven- 
iently be  employed  upon  one  operation. 

2.  They  are  continuous ;  that  is,  they  are  never  liable 
to  fatigue,  and  never  need  rest.  Animals  must  spend 
the  greater  part  of  their  time  in  feeding  or  in  repose. 
Specially  is  this  the  case,  if  they  are  worked  rapidly. 
During  this  time,  the  labor  which  they  perform  must 
either  be  suspended,  or  else  other  animals  must  take  their 
place.  A  horse  cannot  labor  severely  for  more  than 
eight  hours  in  twenty-four.  Hence,  if  the^uninterrupted 
labor  of  horses  were  required  for  twenty-four  hours, 
three  relays  must  be  provided.  Thus,  if  a  boat  were 
required  to  perform  a  voyage  in  twenty-four  hours,  she 
must  employ  three  relays  of  horses  ;  that  is,  a  steam 
boat,  worked  by  a  power  equal  to  that  of  one  hundred 
and  fifty  horses,  would  require  four  hundred  and  fifty 
horses,  in  order  to  create  the  necessary  momentum. 

3  Hence,  there  is  a  great  gain  in  Economy.  The 
first  cost  of  inanimate  is  generally  less  than  that  of  an- 
imate agents  ;  they  are  liable  to  no  diseases  ;  they  re- 
tpiire  no  food  ;  and  create  expense  only  while  they  are 
pcrfortring  their  work.  Were  the  labor  now  ])erformed 
i)y  steam,  to  be  pe"formed  by  horses,  the  price  of  the 
ordinary  necessaries  of  life   would   be  quadrupled,  and 


ANIMATE   AND   INAMMATE    AGENTS,  69 

man}-  articles  of  ordinary  use  would  be  placed  out  of  the 
reach  of  any  but  the  most  opulent.  Nor  is  this  all. 
The  subs'iiution  of  inanimate  for  animate  power,  has  a 
great  tendency  to  reduce  the  cost  or  to  increase  the 
supply  of  all  agricultural  products.  Supjiose  that,  by 
the  use  of  steam,  one  thousand  horses  can  be  dispensed 
with  A  horse  requires  for  sustenance,  throughout  the 
year,  as  much  agricultural  produce  as  would  support 
eight  men.  If,  then,  these  one  thousand  horses  can  be 
dispensed  with,  there  may  be  produced,  on  the  land 
which  was  formerly  employed  for  the  production  of  luiy, 
as  much  wheat  as  will  support  eight  thousand  men. 
This  must,  at  first,  reduce  the  price  of  wheat  ;  and  the 
result  would  be,  that  the  district  would  support  eight 
thousand  more  men  than  before. 

4.  There  is  also,  commonly,  st  gain  in  personal  safe- 
ty. Inanimate  agents  act  under  laws  which  may  be 
known  and  obeyed,  and  of  which  the  results  may  be 
commonly  foreseen  and  guarded  against.  Animals  are 
endowed  with  passions  and  will,  which  we  can  frequently 
neither  control  nor  influence.  Besides,  the  greater  ex- 
pensiveness  of  the  individual  machines  employed  in  the 
use  of  inanimate  agents,  renders  it  for  the  interest  of  the 
proprietor,  to  employ  men  of  experience  and  responsi-^ 
bility  to  manage  them.  This  very  sensibly  diminishes 
the  risk.  When  we  reflect  upon  the  vast  amount  of 
travelling  by  steamboats  and  railroads,  it  must  be  evi- 
dent, that,  notwithstanding  the  accidents  ♦'>  which  they 
are  liable,  a  vastly  greater  amount  of  human  life  would 
be  sacrificed,  if  the  same  number  of  persons  were  trans- 
ported by  horses.  It  is  also  to  be  remembered,  that 
the  use  of  steam  is  yet  in  its  infancy,  and  that  greater 
experience  and  skill  will  materially  reduce  the  number 
of  accidents  to  which  this  mode  of  conveyance  is  at 
present  liable. 

5.  Inanimate  agents  can  be  used  without  Ike  injliction 
of  pain.  Inanimate  agents  are  insensible.  Where  the 
labor  to  be  accomplished  is  either  severe,  or  where  it 
requires  great  speed,  animals  must  be  rapidly  destroyed. 
This  exposes  them  to  great  suffering.     A  horse  w  a 


70        MEANS  BV  WHICH  MOMENTUM    IS  APPLIED. 

Stage  coach  can  rarely  travel,  rapidly^  more  than  ten 
miles  a  day  ;  and  most  horses  will  endure  even  this  la- 
bor hut  for  a  short  time.  From  this  sufi'ering  inanimate 
power  is  exempt.  It  never  endures  pain  from  being 
over  driven. 

6.  Animate  power  decreases  with  velocity.  Hence, 
we  must  soon  arrive  at  a  point  beyond  which  it  can  no 
further  be  used  to  create  momentum.  If  we  represent 
the  tractive  force  of  a  horse,  when  moving  at  two  miles 
an  hour,  at  100,  his  force  at  the  rate  of  three  miles,  will 
be  81  ;  at  the  rate  of  four  miles,  64  ;  at  the  rate  of  five 
miles,  49  ;  at  the  rate  of  six  miles,  36  ;  while  at  the 
top  of  his  speed,  he  can  carry  nothing  more  than  his 
own  weight.  An  engine,  on  the  contrary,  may  be  made 
to  work  as  powerfully  at  one  degree  of  velocity  as  at  an- 
other. In  all  cases,  therefore,  in  which  both  great  pow- 
er and  great  velocity  are  required,  inanimate  power 
must,  of  necessity,  be  employed. 

From  these  causes,  we  see  that  inanimate  is  rapidly 
taking  the  place  of  animate  power,  both  where  stationary 
and  where  locomotive  force  is  required.  By  the  addi- 
tional speed  which  it  is  capable  of  producing,  it  gives 
rise  to  great  economy  of  time.  This,  to  all  persons  en- 
gaged in  active  employments,  is  a  consideration  of  vast 
moment.  Being  a  continuous  agent,  it  is  also  enabled  to 
act  with  the  greatest  certainty.  Hence,  men  may  ad- 
just their  transactions,  in  different  places,  with  entire 
precision.  This  is  also  another  source  of  economy, 
both  of  lime  and  of  capital.  And,  besides,  notwith- 
standing the  expensiveness  of  the  arrangements  for  the 
I'se  of  locomotive  forces,  yet  the  amount  of  additional 
travelling  to  which  they  give  rise,  is  so  great,  that  the 
expensiveness  of  transportation  between  different  places 
IS,  in  general,  materially  diminished. 

II.  Of  the  natural  agents  by  which  momentum  is  ap- 
plied. 

It  is  obvious,  that  a  great  addition  is  made  to  human 
power,  where  the  agents  for  creating  momentum  have 
been  discovered.  But  this  is  not  all.  Several  combi- 
nations of  matter  may  be  formed,  by  which  mere  hu- 


MEANS   BY   WHICH   MOMENTUM  IS    APPLItb.  7! 

man  force  may  be  greatly  assisted,  and  which,  by  being 
united  with  the  agents  for  creating  momentum,  may 
f^reatly  increase,  and  vary,  and  give  adaptation  to,  its 
utihty.  These  are  called  the  mechanical  powers,  which 
are  treated  of  at  large  in  works  on  Mechanics  and  Nat- 
ural Philosophy.  In  their  simple  form,  they  are  the 
lever,  the  wheel  and  axle,  the  inclined  plane,  the  screw, 
the  pulley,  and  the  wedge.  They  are  variously  combine 
ed,  for  producing  the  different  results  of  mechanics,  bu! 
may  be  all  reduced  to  these  simple  elements. 

B}  means  of  these,  the  muscular  power  of  man  is  en- 
abled greatly  to  increase  its  eifect  ;  that  is,  a  man  by 
his  own  strength  can  now  accomplish  labor  which  he 
could  not  accomplish  without  them.  Though  these  lu- 
struments  give  no  new  strength,  yet  they  greatly  increase 
the  effectiveness  of  that  which  already  exists ;  ami 
hence,  their  invention  marks  an  important  era  in  the  pro- 
gress of  civilization.  It  is  also  to  be  remarked,  that 
their  origin,  in  point  of  time,  is  jar  in  advance  of  the  dis- 
covery of  the  creative  agents.  Archimedes  had  made 
great  progress  in  the  discovery  and  application  of  these 
modifying  powers,  when  the  use  of  creative  tgents  was 
almost  unknown. 

The  triumph  of  human  skill  is,  however,  achieved, 
when  these  two  forms  of  natural  agency  are  combined 
in  a  single  machine.  By  the  one  we  generate  power,  to 
what  extent  soever  we  choose ;  and  by  the  other  wv, 
modify  it  in  any  form,  give  to  it  any  application,  and 
direct  it  to  any  purpose,  that  our  conventeilce  may 
require.  It  is  in  this  manner,  that  man  renders  all  the 
various  powers  of  nature  tributary  to  himself.  He  can 
thus  create,  and  use  as  he  pleases,  as  great  a  powei  as 
he  desires.  He  devolves  the  labor  on  nature,  .md  he 
has  only  to  fabricate  the  instruments,  and  give  them  llioii 
direction.  He  is  successful  just  in  projjortion  as  he 
does  this;  since  nature  always  works  with  undeviating 
accuracy,  with  unerring  skill,  with  indefatigable  perse- 
verance ;  and  she  always  works  for  nothing. 

't  may  be  useful  to  specify  some  of  the  results  ac- 
conipl'shed  by  the  various  instruments,  which  man  em 


72      MEANS    BY    WHICH    MOMENTUM    IS    APPLIED. 

ploys  for  modifying  that  momentum  which  is  exerted  by 
the  first  class  of  natural  agents. 

1.  We  are  thus  enabled  to  change  the  direction  of 
the  power.  Thus,  in  the  cylinder  of  the  steam  engine, 
the  momentum  is  created  either  in  perpendicular  or  hor- 
izontal strokes.  This,  being  by  means  of  an  arm  and  a 
crank  changed  into  a  circular  motion,  moves  the  paddle- 
wheels  of  a  steamboat.  Thus,  also,  in  the  machinery 
for  moving  a  trip-hammer,  a  circular  is  changed  into  a 
perpendicular  motion,  by  the  striking  of  the  cogs  of  a 
wheel  upon  the  short  arm  of  a  lever,  while  the  hammer 
is  attached  to  the  other  arm. 

2.  We  exchange  power  for  velocity.  This  is  done  in 
all  spinning  machinery.  By  water  or  by  steam,  we 
cause  a  large  wheel  to  revolve  ten,  twenty,  or  thirty 
times  in  a  minute,  and  with  a  power  equal  to  that  which 
could  be  produced  by  fifty  or  one  hundred  horses.  In 
spinning,  however,  we  need  small  power,  but  great  ve- 
locity. Hence,  by  the  combination  of  various  large  and 
small  wheels,  we  produce  a  v^elocity,  in  a  thousand  spin 
dies,  equal  to  many  thousand  revolutions  in  a  minute. 
The  who*e  of  this  fifty  or  one  hundred  horse  power,  is 
thus  spread  over  a  large  manufactory,  and  adapted,  by 
various  contrivances,  to  every  degree  of  velocity,  and 
every  form  of  motion  that  may  be  required. 

3.  We  are  thus  enabled  to  exert  forces  too  great  for 
animate  power.  By  water  power,  or  by  steam,  we  caa 
generate  as  great  a  force-  as  we  please  ;  and  we  have 
only  to  combine  with  it  the  proper  adjustments,  in  ordei 
to  exert  upon  any  point  any  momentum  which  we  desire. 
The  power  required  to  roll  and  hammer  iron,  or  copper, 
to  propel  steamboats,  to  forge  anchors,  and  that  used  in 
•ieveral  other  of  the  arts,  is  greater  than  could  be  exert- 
ed by  any  animate  force  with  which  we  are  acquainted, 
unless  it  were  exerted  by  means  of  some  combination 
of  the  mechanical  forces. 

4.  We  are  thus  also  enabled  to  execute  operations  too 
delicate  for  human  touch.  Very  delicate  operations, 
soon  weary  the  nervous  system  by  the  excessive  atten- 
tion which  they  of  necessity  require.     Thus,  in  order 


MEANS    BY     WHICH     MOMENTUM    IS    APFu^ED.       73 

10  ?pin  the  finest  thread  on  a  spinning  wheel,  there  must 
be  great  accuracy,  both  in  the  velocity  of  the  wheel, 
and  in  the  muscular  power  exerted  in  drawing  out  the 
thread.  This  requires  an  effort  of  attention,  which  the 
human  system  cannot  long  maintain,  and,  of  course,  the 
thread  will  frequently  be  uneven.  But  by  means  of 
machinery,  both  of  these  operatio;?s  may  be  adjusted 
with  mathematical  accuracy  ;  and  as  machines  have  no 
nerves,  they  will  be  perfectly  faithful  to  that  adjustment. 
Thus  we  invariably  see  that  the  most  delicate  fabrics  are 
those  that  are  wrought  by  natural  agents.  Hence  ma- 
chinery is  necessarily  used  in  the  manufacture  of  such 
articles  as  require  for  their  formation  identity  of  result, 
•juch  as  screws,  types,  &c. 

^.  By  means  of  machinery,  we  are  enabled  to  accu- 
mnlate  power.  We  thus  exchange  a  continuous  and 
small  force,  for  a  sudden  and  violent  one.  Such  is  the 
case  with  the  pile-driver,  and  the  common  beetle  or  mal- 
let, when  used  in  combination  with  the  wedge. 

6.  By  the  same  means  we  are  enabled  to  exchange  a 
short  and  irregular  effort  for  a  continuous  and  regular 
movement^  or  to  spread  the  action  of  &  short,  over  a  long 
period  of  time.  This  is  done  in  clocks,  watches,  and 
other  similar  machinery.  Here  we  spread  the  action  of 
a  minute,  over  a  day,  or  a  week,  and  with  almost  maith- 
ematical  accuracy. 

In  consequence  of  the  above  mentioned  application 
of  machinery,  various  other  advantages  are  realized  in 
production.  For  instance  ;  there  is  frequently  a  great 
saving  of  material,  as  in  the  change  from  making  boards 
with  the  adze,  to  that  of  making  them  with  the  saw; 
and  again  the  labor  of  natural  agents  is  so  much  cheap- 
er, that  many  articles,  which  would  otherwise  have  been 
worthless,  are  now  deserving  of  attention,  as  they  may 
now  be  profitably  endowed  with  some  form  of  value. 

I  close  these  remarks,  upon  the  use  of  natural  agents, 
with  an  extract,  very  graphically  describing  the  power 
of  the  steam  engine,  which  has  commonly  been  ascribed 
to  Francis  Jeffrey,  Esquire,  now  Lord  Jeffrey,  of  Ed- 
uiburgh  : 

7 


74       MEANS    BY    WHICH    MOMENTUM    IS    APPLIED 

"  It  (the  Steam  engine)  has  hecome  a  thing,  stupen- 
dous alike  for  its  force  and  its  flexihility  ;  for  the  prodi- 
gious power  which  it  can  exert ;  and  the  ease,  precision, 
and  ductihty  with  which  it  can  be  varied,  distributed,  and 
applied.  The  trunk  of  an  elephant,  that  can  pick  up  a 
pin  or  rend  an  oak,  is  as  nothing  to  it.  It  can  engiave 
a  seal,  and  crush  masses  of  obdurate  metal  before  it ; 
draw  out,  without  breaking,  a  tliread  as  fine  as  a  gossa- 
mer ;  and  lift  up  a  ship  of  war,  like  a  bauble  in  the  air. 
It  can  embroider  muslin,  and  forge  anchors  ;  cut  steel 
into  ribands,  and  impel  loaded  vessels  against  the  fury 
of  the  winds  and  waves. 

"It  would  be  difficult  to  estimate  the  value  of  the 
benefits  which  these  inventions  have  conferred  upon  the 
country.  There  is  no  branch  of  industry  that  has  not 
been  indebted  to  them,  and  in  all  the  most  material,  they 
have  not  only  widened  most  magnificently  the  field  of  its 
exertions,  but  multiplied,  a  thousand  fold,  the  amount  of 
its  productions.  It  is  our  improved  steam  engine,  that 
las  fought  the  battles  of  Europe,  and  exalted  and  sus- 
tained, through  the  late  tremendous  contest,  'the  political 
greatness  of  our  land.  It  is  the  same  great  power, 
which  enables  us  to  pay  our  national  debt,  and  to  main- 
tain the  arduous  struggle  in  which  we  are  still  engaged, 
wit]i  the  skill  and  capital  of  countries  less  oppressed  with 
taxation. 

"  But  these  are  poor  and  narrow  views  of  its  impor- 
tance. It  has  increased,  indefinitely,  the  mass  of  human 
comforts  and  enjoyments,  and  rendered  cheap  and  acces- 
sible, all  over  the  world,  the  materials  of  wealth  and 
prosperity.  It  has  armed  the  feeble  hand  of  man,  in 
short,  with  a  power  to  which  no  limits  can  be  assigned  ; 
completed  the  dominion  of  mind  over  the  most  refractory 
qualities  of  matter  ;  and  laid  a  sure  foundation  for  all 
those  future  miracles  of  mechanical  power,  which  are  to 
oid  and  reward  the  labors  of  after  generations. " 


SECTION  II. 

OP    DIVISION    OP    LABOR. 

We  have  shown  that  the  productiveness  of  human  in- 
dustry may  be  greatly  increased  by  the  discovery  of  tlie 
qualities  and  relations  of  things,  and  by  the  invention  of 
instruments,  by  which  those  quahties  may  be  applied  and 
modified.  In  this  manner,  the  power  of  man  receives 
an  almost  incalculable  augmentation.  But  this  is  not 
all.  It  is  found  that  the  result  of  human  effort  may  be 
still  further  very  greatly  increased.  Thus  :  supposing 
the  agents  of  nature,  and  also  their  mode  of  appHcation, 
to  be  known,  and  that  a  given  number  of  men  are  about 
to  perform  an  operation,  they  may  make  such  arrange- 
ments among  themselves,  as  will,  in  a  given  time,  and 
with  a  given  expenditure  of  labor,  enable  them  to  accom- 
■  plish  a  vastly  greater  result  than  could  be  accomplished 
without  such  arrangements.  The  mode,  in  which  tliis  is 
effected,  is  by  division  of  labor. 

Division  of  labor  is  always,  to  some  degree,  employed 
where  different  individuals  are  engaged  in  the  different 
branches  of  human  industry.  Thus,  labor  is  divided 
when  different  persons  employ  themselves  in  the  several 
departments  of  discovery,  application,  and  operation. 
Labor  is  still  further  divided,  when  those  employed  in 
these  great  departments,  are  separated  into  distinct 
classes,  each  class  devoting  itself  to  the  accomplishment 
of  one  particular  object.  Thus,  one  man  investigates 
llie  laws  of  mechanics  ;  another,  those  of  astronomy  ; 
and  a  third,  those  of  vegetation.  One  man  is  devoted 
to  the  profession  ql  the  law  ;  and  another,  to  that  of 
medicine  ;  while  each  separate  trade  is  employed  in  the 
creation  of  a  particular  product.  By  all  these  divisions, 
It  is  manifest  that  the  result  of  the  whole  is  greatly  in- 
creased. It  is  only  the  savage,  that  combines  in  his 
own  person,  in  all  their  departments,  the  character  of 
Dhiiosopher,  inventor,  and  operator.     He  approxinuites 


76  DIVISION    OF    LABOR. 

to  the  civilized  state,  only  in  so  far  as  he  begins  to  con 
fine  himself  to  some  particular  calling.     And  it  is  always 
in  the  most  advanced  periods  of  civ  lization,  that  division 
of  labor  is  carried  to  its  ultimate  limits. 

But,  besides  this,  the  different  parts  of  any  operation 
may  be  analyzed ;  and  to  each  part  the  whole  labor 
of  a  single  individual  may  be  confined.  Thus,  the  la- 
bor of  making  a  pin  may  be  divided  into  wire  drawing, 
wire  straightening,  pointing,  heading,  tinning,  &c.  In 
Political  Economy,  labor  is  said  to  be  divided,  just  in 
so  far  as  these  several  processes  are  assigned  to  separate 
operators.  It  is  found,  by  experience,  that  such  an  ar- 
rangement increases  the  productiveness  of  human  labor 
to  an  extent,  which,  to  a  person  who  had  not  examined 
the  facts,  would  appear  wholly  incredible.  The  princi- 
ples on  which  this  increased  productiveness  of  labor 
depends,  are  the  following  : 

1.  Division  of  labor  shortens  the  period  required  for 
learning  an  operation.  The  more  complicated  the  oper- 
ation, the  longer  is  the  time  necessary  for  acquiring  the 
skill  requisite  to  the  performing  of  it  successfully.  But 
this  time  spent  in  learning,  is  useless  to  the  operator  and 
to  society,  only  in  so  far  as  it  is  necessary  to  the  crea- 
tion of  the  product.  The  longer  the  time  necessary  for 
learning  an  operation,  the  higher  must  be  the  wages  of 
the  operator,  for  the  remainder  of  his  life  ;  and  also,  of 
course,  the  greater  must  be  the  price  of  his  products. 
If  this  can  be  lessened,  the  price  of  course  will  fall. 
Now,  that  this  is  lessened,  by  division  of  labor,  is  evi- 
dent from  an  obvious  example.  Suppose  that  a  given 
process,  say  the  making  of  nails,  consists  of  seven  oper- 
ations ;  and  that  each  of  these  operations  required  one 
year's  practice,  before  it  could  be  successfully  perfonn- 
ed.  Now,  if  seven  men  were  to  learn  this  occupalion, 
and  each  one  were  obliged  to  learn  every  operation,  the 
time  required  would  be  7  X  7  =  49  years  ;  whereas,  if 
each  of  them  were  required  to  learn  but  one,  the  time 
wou'd  be  but  7  X  1  =7,  or,  the  difference  would  be, 
49  —  7=^42  years  of  human  labor,  or  six  sevenths  of 
the  whole  time,  v  hich  would  thus  be   saved      There 


DIVISION    OF    LABOR.  77 

would  be  six  years  more  of  productive  labor,  in  ibe  life 
of  each  of  these  men  ;  and,  as  they  had  spent  less  time 
in  acquiring  their  art,  they  could  afford  to  exercise  it  for 
lower  wages. 

Besides,  there  is,  intimately  connected  with  this  cause, 
another,  of  considerable  importance.  Every  one,  in 
learning  an  art,  must,  by  unskilfulness,  destroy  a  consid- 
erable portion  of  capital.  And  this  amount  of  capita! 
will  be  in  proportion  to  the  number  of  operations  which 
he  is  obliged  to  learn.  Thus,  suppose  that  a  man  learns 
seven  operations,  and,  in  learning  each,  destroys  ten 
dollars'  worth  of  capital,  the  amount  which  he  will  de- 
stroy, in  acquiring  his  whole  trade,  will  be  7  X  10  =  70. 
If  he  have  to  learn  but  one,  it  will  be  but  ten  dollars  ; 
and  thus,  the  difference  will  be  70 — 10  =  60  dollars, 
upon  every  such  individual.  A  difference,  so  great  as 
these  two  combined,  when  spread  over  the  whole  face 
of  society,  will  have  no  inconsiderable  effect  upon  the 
annual  nett  revenue  of  a  community. 

2.  When  one  man  performs  all  the  operations  required 
in  a  complicated  process,  much  time  is  lost  in  passhig 
from  one  operation  to  anotlier.  By  division  of  labor, 
this  loss  is  avoided. 

The  effect  of  habit  is  known  to  every  one.  It  ren- 
ders any  operation  easy,  which  is  frequently  repeated. 
The  mind  and  the  muscles  become  adapted  to  a  partic- 
ular form  of  labor  ;  but,  if  that  form  of  labor  be  sus- 
pended, and  our  attention  be  directed  to  another,  it 
requires  a  considerable  time  before  we  can  acquire  a 
different  habit,  and,  in  the  mean  time,  the  good  effects 
of  the  preceding  habit,  are,  to  a  considerable  degree, 
lost.  Hence,  he  who  is  frequently  passing  from  one 
occupation  to  another,  is  in  the  condition  of  him  who  is, 
during  his  whole  life,  forming  habits  ;  and  never  in  the 
condition  of  him,  who  has  the  advantage  of  habits 
already  formed.  Besides,  this  long  habit  produces  in 
the  muscles  a  capacity  for  continued  exertion.  He  who 
IS  in  the  habit  of  performing  an  operation,  can  perform 
t,  without  sensible  fatigue,  for  several  hours  together. 
K^ery  one  who  has  ever  sawed  wood,  or  used  a  spu.le 
7» 


78  niVISIOA     OF    LABOR. 

in  a  garden,  is  sensible  of  this  fact.  Now,  all  this  ad- 
vantage is  lost,  by  frequently  turning  from  one  operation 
to  another. 

3.  Whare  complicated  tools  are  to  be  used,  and  there 
is  no  division  of  labor,  much  time  is  also  lost  in  adjust- 
ing them  to  the  different  kinds  of  work.  By  division 
of  labor,  this  disadvantage  is  obviated.  Suppose  that 
nails,  of  different  sizes,  are  to  be  made,  and  it  is  neces- 
sary that  the  machinery,  in  order  to  adapt  it  to  the  dif- 
ferent kinds  of  work,  should  be  frequently  adjusted  ;  the 
time  so  occupied  produces  nothing,  and  is  lost.  If,  on 
the  contrary,  one  machine  is  permanently  used  for  the 
manufacture  of  nails  of  one  particular  size,  all  this  loss 
is  avoided.  This  is  also  more  obvious,  when  the  ad- 
justment involves  expense ;  as,  for  instance,  when  a  fur- 
nace is  used.  If  a  furnace  be  heated,  and  then  suffered 
to  cool  while  the  operator  is  performing  some  other  la- 
bor, the  fuel  consumed,  after  he  leaves  it,  and  that  which 
is  used  to  bring  it  again  to  the  requisite  temperature,  are 
a  total  loss,  in  addition  to  that  of  the  time  and  labor  re- 
quired in  kindling  the  fire,  and  in  waiting  for  the  rise  of 
temperature.  By  dividing  the  labor,  so  that  one  person 
shall  be  always  employed  at  the  furnace,  whilst  others 
are  employed  at  other  parts  of  the  process,  much  capi- 
tal and  labor  will  be  saved. 

4.  By  constantly  pursuing  the  same  occupation,  a 
degree  of  skill  and  dexterity  is  acquired,  which  greatly 
increases  the  productiveness  of  human  labor.  This  ad- 
vantage is  lost,  by  employing  the  same  individual  upon 
several  operations.  Adam  Smith  informs  us,  that  a 
blacksmith,  who  occasionally  makes  nails,  but  whose 
whole  business  is  not  that  of  a  nail-maker,  can  make  bti( 
&om  eight  hundred  to  one  thousand  nails  a  day ;  whilst 
a  lad,  who  has  never  exercised  any  other  trade,  can 
nake  upwards  of  twenty-thsee  hundred  a  day.  All  who 
have  been  accustomed  to  visit  manufactories,  must  have 
been  surprised  to  observe  the  dexterity  which  is  ac- 
quired, even  by  children,  in  performing  the  operations 
in  which  the}  are  exclusively  engaged.  It  is  probable 
tliat  the  performers  of  jugglery,  or  sleight-of-hand,  de- 


DIvrsiON    OF    LABOR.  79 

rive  their  skill  almost  entirely  from  this  cause.  They 
seldom  perform  more  than  a  few  operations,  but  by 
practising;  these,  and  these  alone,  for  a  great  length  of 
time,  they  at  last  attain  to  a  proficiency,  which,  to  a 
spectator,  is  incomprehensible. 

5.  Division  of  labor  suggests  the  contrivance  of  tools 
for  the  performance  of  the  operation  in  which  it  is  em- 
ployed. 

The  more  completely  any  process  is  analyzed,  the 
simpler  must  become  the  individual  operations  of  which 
it  is  composed  :  and  the  simpler  any  operation  is,  the 
easier  is  it  to  contrive  a  tool,  or  an  adjustment,  by  which 
it  may  be  performed.  Adam  Smith  informs  us,  that,  in 
the  first  steam  engines,  boys  were  constantly  employed 
to  open  a  communication  between  the  boiler  and  cyhn- 
der,  according  as  the  piston  ascended  or  descended. 
One  of  these  boys  observed,  that,  by  uniting  the  handle 
of  the  valve  which  opened  this  communication  with  an- 
other part  of  the  machine,  the  valve  would  open  and 
shut  without  his  assistance,  and  leave  him  at  liberty  to 
play  with  his  fellows.  One  of  the  most  important  im- 
provements of  this  machine  was  thus,  by  division  of 
labor,  brought  within  the  capacity  of  a  playful  boy.  It 
would  have  been  very  difficult  to  invent  machinery  for 
the  making  of  nails,  when  all  the  processes  were,  con- 
sidered as  a  complicated  whole.  But  after  the  several 
operations  are  divided,  and  are  assigned  to  in.lividuals 
separately,  it  becomes  comparatively  easy  to  construct 
an  adjustment,  by  which  any  one  of  them,  singly,  could 
be  performed.  This  is  the  first  step  in  invention.  But 
this  is  not  all.  After  these  several  single  instruments 
have  been  invented,  the  next  step  is  to  combine  them 
logether.  This  is  the  most  finished  effort  of  mechanical 
genius.  This  is  the  principal  differencei  between  a  tool 
and  a  machine.  A  tool  performs  one  single  operation  , 
a  machine  combines  several  tools  together,  and  accom- 
plishes either  the  whole,  or  a  considerable  part,  of  a 
complicated  process. 

6.  Every  one,  at  all  acquainted  with  manufacturing 
employments,  must  have  observed,  that  some  of  the  op- 


/ 
80  DIVISION    OF    LABOR. 

erations  in  a  given  process,  require  greater  muscular 
power,  or  greater  skill,  or  greater  dexterity  than  others. 
Some,  for  instance,  can  be  performed  only  by  the  most 
experienced  workmen,  while  others  can  be  perfectly 
well  performed  by  children.  Now,  by  division  of  labor 
a  manufacturer  is  enabled  to  employ,  upon  each  opera- 
tion, precisely  the  labor  adapted  to  it,  and  is  obliged  to 
pay  for  each  portion  of  the  labor  no  more  than  it  is  ac- 
ludly  worth.  This  must  greatly  diminish  the  cost  of 
production.  Thus,  the  manufacture  of  pins  is  divided 
into  ten  different  operations,  and  each  operation  emplojs 
one  laborer.  But  some  of  those  laborers  are  men  ; 
others  are  women  and  children  ;  and  their  wages  vary 
from  six  shillings  to  four  and  a  half  pence  sterling  a  day. 
If  the  labor  were  not  divided,  one  person  must  under- 
stand the  whole  process,  and,  therefore,  must  be  em- 
ployed at  the  highest  price  of  labor  ;  and  hence,  he 
must  be  paid  at  the  rate  of  six  shillings  a  day,  for  that 
part  of  the  work  which  is  worth  only  four  and  a  half 
pence  a  day.  Every  one  must  see  that  this  would 
greatly  increase  the  price  of  pins,  and  also  occasion  a 
great  deficiency  in  labor.  It  is  by  this  means,  also,  that 
occupation  is  provided  for  the  weak  and  the  aged,  for 
females  and  for  children,  who  would,  otherwise,  be  una- 
ble to  earn  any  thing.  Thus,  all  the  labor  of  the  com- 
munity is  rendered  productive,  and  an  immense  amount 
is  annually  added  to  the  revenue  of  a  country.  Nor  is 
the  gain  to  be  estimated  at  simply  what  is  thus  earned. 
The  whole  community  is  thus  acquiring  those  habits  of 
industry  and  self-dependenrfe,  which  are  essential  to  its 
happiness  and  well-being,  no  less  than  to  the  rapid  ac- 
{All  lulation  of  its  capital.  * 

"  The  following  facts,  respecting  the  manufacture  of  watches,  ill  us- 
'.rale  very  forcibly  tiie  extent  to  which  the  division  of  labor  may  bo 
carried,  and  also  the  amount  of  value  which  may  be  conferred  upon 
tlje  ciienpest  substance  by  accumulated  and  high  priced  labor.-  — 

A  watch  consists  of  9fJ2  pieces,  and  forty-three  trades  are  employed 
m  their  construction  ;  the  chain,  whose  lenj;th  is  eight  inches,  has  I(>5 
links,  each  containing  three  plates  and  two  pins,  in  all  H25  pieces,  and 
passes  through  fifteen  hands,  men.  women,  and  children,  of  three 
-rades,  before  it  is  complete  :  allowing  them  five  hands  in  each  trade, 
?15  persons  find  employment  in  making  a  watch.    This  extensive  and 


DIVISION    OF    LABOR.  81 

Nor  are  the  benefits  of  the  division  of  labor  confined 
to  mechanical  processes.  The  results  have  been  equally 
interesting,  in  those  cases  where  this  principle  has  been 
applied  to  intellectual  labor.  The  effect  of  such  a  di- 
vision is  seen  in  the  following  account,  which  I  intro- 
rluce  here,  not  only  j^ecause  it  very  happily  illustrates 
this  whole  subject,  but  also  because  it  may  suggest  to 
3civM)tific  men,  some  other  cases  in  which  it  may  ])e 
again  applied  with  similar  benefit. 

During  the  period  of  the  French  revolution,  the  gov- 
ernment was  desirous  of  producing  a  series  of  mathe- 
matical tables,  in  order  to  facilitate  the  extension  of  the 
decimal  system,  whicii  had  been  recently  adopted 
They  directed  their  mathematicians  to  construct  such 
tables  on  the  most  extensive  scale.  The  superintend- 
ence of  the  work  was  confided  to  M.  Prony.  It  hap- 
pened that  shortly  after  he  had  undertaken  it,  he  opened, 
in  a  bookstore,  Adam  Smith's  "  Wealth  of  Nations," 
and,  by  accident,  turned  to  the  chapter  on  division  of 
labor.  The  thought  immediately  suggested  itself,  that 
this  might  be  adopted  in  the  work  in  which  he  was  en- 
gaged. He  immediately  followed  out  the  suggestion, 
and  arranged  his  plan  accordingly.  He  divided  the 
persons  wht)  were  to  execute  the  labor  into  three 
sections  : 

Tke  first  seclion  was  composed  of  five  or  six  of  the 
most  eminent  mathematicians  of  France.  Their  duty 
was  to  ascertain  the  analytical  expressions  which  were 
most  readily  adapted  to  simple  numerical  calculation,  and 
which  could  be  performed  by  many  individuals  employee! 
at  the  same  time.  The  formulae  on  the  use  of  which  it 
had  decided,  were  to  be  delivered  to  the  second  section. 

numerous  individuality  will  apply,  more  or  less,  to  every  manufiic- 
lured  article  in  every  day  use  ;  but  no  brancti  of  manufactures  will 
afford  such  an  illustration  of  the  value  of  labor.  The  iron  of  which 
the  balance-spring  is  formed  is  valued  at  something  less  than  a  far- 
thing;  this  produces  an  ounce  of  steel,  worth  il^d.,  which  is  drawn 
into  2,250  yards  of  spring  wire,  and  represents  in  the  market  £\'.\4s  ; 
but  still  another  process  of  hardening  this  originally  farthing's  worth 
of  iron  renders  it  workable  into  7,i)5()  balance-springs,  which  wili 
realize,  at  the  common  pri*"?  of  23.  6d.  ea:h,  JC'J4G  bs.  uie  effect  of  la 
bor  alone. 


83  DIVISION    OF     LABOR. 

77i«  second  section  consisted  of  seven  or  eight  per- 
sons, of  considerable  acquaintance  with  mathematics, 
whose  duly  it  was,  to  convert  into  numbers  the  formulae 
put  into  their  hands  by  the  first  section  ;  and  then  to 
deliver  out  these  numbers  to  the  members  of  the  third 
section,  and  to  receive  from  them^  the  finished  calcula- 
tions. These  they  could  verify  without  repeating  the 
work. 

The  third  section  consisted  of  sixty  or  eighty  nersons. 
They  received  the  numbers  from  the  second  section, 
and,  using  nothing  more  than  addition  and  subtraction, 
returned  to  that  section  the  finished  tables.  Nine- 
tenths  of  this  class  had  no  knowledge  of  arithmetic  be- 
yond its  first  two  rules  ;  and  it  is  remarkable  that  these 
were  usually  found  more  correct  in  their  calculations, 
than  those  who  possessed  a  more  extensive  knowledge 
of  the  subject.  The  extent  of  the  labor,  which  was 
thus  executed  in  a  remarkably  short  space  of  time,  may 
be  estimated,  when  it  is  staled  that  the  tables  thus 
formed  are  computed  to  occupy  seventeen  large  folio 
volumes.  And  yet  we  see  that  the  greatest  part  of  the 
labor  was  actually  accomplished  by  persons  who  might 
be  employed  at  very  small  expense,  and  who  could  do 
the  work  assigned  them,  as  perfectly  as  those  whose 
labor  was  the  most  expensive.* 

We  thus  see  the  manner  in  which  the  productiveness 
of  human  labor  may  be  increased.  1st.  By  discover- 
ing the  various  agents  of  nature  which  God  has  created 
for  our  benefit;  2d.  By  applying  these  agents  to  the 
service  of  man ;  3d.  By  so  arrangmg  and  adjusting  hu- 
man industry,  that  the  labor  necessary  to  be  employed, 
may  operate  with  the  greatest  possible  advantage.  In 
one  or  other  of  these  methods,  must  every  improvement 
ii;  the  j)hysical  condition  of  mankind  operate.  And 
civilization  advances  just  in  proportion  as  all  of  them 
combitied  are  brought  to  bear  upon  the  work  of  produc- 
tion ;  that  is,  of  creation  of  objects  of  desire,  in  other 
words,  of  means  for  human  happiness. 

•  Babbajje  on  Econom-  of  Machinery. 


LIMITATIONS    TO    DIVISION    OF    LABOR.  83 


SECTION  III. 

LIMITATIONS     TO      THE      DIVISION      OF      LABOR,      BOTH 
INDIVIDUAL    AND    NATIONAL 

We  now  proceed  to  another  branch  of  the  subject  ; 
the  Limitations  of  the  Divisions  of  Labor.  These 
may  be  considered  in  reference  to  individuals,  and  to 
nations.  In  so  far  as  the  individual  is  concerned, 
these  limitations  arise  from  three  causes.  1st.  The 
J^ature  of  the  process;  2d.  Deficiency  of  Capital; 
and  3d.  Demand. 

1 .  From  the  nature  of  the  Process.  Every  process 
can  be  analyzed  into  its  ultimate  elements  ;  that  is,  into 
the  various  simple  processes  of  which  it  is  composed. 
Thus  in  pin-making  the  straightening  of  the  wire  is  one 
operation,  the  cutting  it  into  equal  lengths  is  another, 
the  sharpening  of  the  points  is  another,  the  heading  of 
the  pin  is  another,  &c.  But  when  we  have  reduced  the 
operation  to  its  simple  elements,  we  can  proceed  no 
further.  Hence,  here  is  our  necessary  limit  ;  for  it  is 
uo  division  of  labor  to  employ  two  men  to  perform  pre- 
cisely the  same  operation.  Hence  an  establishment, 
which  carries  division  to  this  limit,  will  be  able,  from 
what  has  been  said,  to  undersell  another  which  does 
not  carry  it  to  the  same  degree  of  perfection.  And 
hence,  in  establishing  a  manufactory,  it  is  important  so 
to  adjust  the  number  and  kind  of  workmen,  that,  when 
the  different  operations  of  a  process  have  been  assigned 
to  different  persons,  these  persons  may  be  in  such  pro- 
portions as  exactly  and  fully  to  employ  each  other. 
The  more  perfectly  this  is  accomplished,  the  greater 
will  be  the  economy.  And,  this  having  been  once  as- 
certained, it  is  also  evident  that  the  establishment  cannot 
be  successfully  enlarged,  unless  it  employ  multiples  of 
this  number  of  worktnen. 

2.  Division  of  labor  may  be  limited  by  deficiency  of 
Capital.     Division   of   labor,  in  manufactures,    cannot 


84  LIMITATIONS    TO    DIVISION    OF    LABOR. 

be  caified  on,  unless  the  proprietor  have  sufficient  capi 
tal  to  employ,  at  the  same  time,  all  the  persons  neces- 
sary to  such  a  division,  and  to  keep  them  so  employed, 
until  the  proceeds  of  their  work  enable  him  to  furnish 
them  again  with  fresh  material.  This  is,  of  course,  a 
considerable  outlay,  and  supposes  a  considerable  accujii- 
ulation  of  the  proceeds  of  pre-exerted  industry.  Hence, 
in  a  poor  or  in  a  new  country,  there  can  be  'but  little 
division  of  labor.  No  one  lias  more  than  enough  capi- 
tal to  employ  himself,  and,  perhaps,  one  or  two  labor- 
ers ;  and  hence,  each  individual  performs  all  the  opera- 
lions  of  each  process,  and  frequently  those  of  several 
processes.  The  same  individual  is  the  farrier,  black- 
smith, cutler,  and,  perhaps,  wheelwright,  for  a  whole 
settlement.  'J'o  illustrate  this  by  a  single  instance  :  If 
a  nailer  be  able  to  purchase  no  larger  amount  of  iron 
and  coal  tlian  he  can  use  in  the  manufacture  of  nails  in 
a  day,  he  must  perform  all  the  parts  of  the  process  him- 
self ;  and,  of  course,  must  labor  very  disadvantageously. 
As  soon,  however,  as  he  is  able  to  double  his  capital, 
he  may  employ  another  person  to  work  with  him,  and 
they  may  then  introduce  a  division  of  labor.  When  he 
has  tripled  his  capital,  he  may  employ  another  workman, 
and  carry  his  division  still  further.  He  may  thus  go  on 
until  he  has  reduced  the  process  to  its  simplest  elements. 
When  he  has  gone  thus  far,  the  accumulation  of  his 
annual  capital  will  enable  him  to  invest  something  in 
fixed  capital.  He  will  thus  be  able  to  purchase  some 
of  the  simpler  machines,  by  which  some  of  the  parts  or 
his  process  may  be  executed.  To  these  he  will  add 
others,  as  he  advances  in  wealth,  until  his  accumulated 
uieans  enable  him  to  combine  them  into  one  machine, 
for  completing  the  whole  process.  Thus  he  becomes 
a  manufacturer^  and  derives  the  larger  part  of  his  rev- 
enue, from  the  use  of  his  fixed  capital.  At  every  step 
liis  gains  will  be  greater,  and  at  the  same  time  the  price 
of  his  product  will  become  less.  It  is  not  pretended 
that  all  these  changes  always,  or  frequently,  take  place 
within  the  lifetime  of  a  single  individual.  The  pro- 
gress of  society  is  not  generally  so  rapid.     Yet  they 


LIMITATIONS    TO    DIVISION    OF    LADOR.  85 

sometimes  occur  in  the  manner  which  I  have  stated.  1 
give  the  illustration,  to  show  the  tendency  of  things, 
and  the  power  of  accumulated  capital.  But,  whether 
the  results  are  comprised  in  the  lifetime  of  one,  two,  or 
three  individuals,  the  principle  is  the  same. 

3.  Division  of  labor  may  be  limited  by  the  demand 
for  the  article  produced. ,  Suppose  that,  in  a  given  dis- 
trict, there  is  a  demand  for  one  hundred  pounds  of  nails 
per  day,  and  that  these  can  be  made  by  two  men.  If 
three  men  could,  by  division  of  labor,  make  two  hun- 
dred pounds  per  day,  there  would  be  but  small  gain, 
either  to  the  workmen  or  to  the  public  ;  because  these 
men  would,  of  course,  lie  idle  half  of  the  time,  and  for 
this  time  they  must  be  paid,  as  well  as  for  the  time  in 
which  they  were  employed.  Or,  if  they  did  not  lie 
ab.oolutely  idle,  that  portion  of  their  time,  which  was 
employed  on  other  labor,  would  be  of  comparatively 
small  value  ;  and  they,  by  attending  to  other  business, 
would  lose  the  skill  which  complete  division  of  labor 
confers  ;  and  which  is  one  of  its  principal  benefits.  The 
case  is  still  stronger,  if  we  take  into  view  the  faci,  that 
division  of  labor  supposes  a  large  investment  of  fixed 
capital,  and  that  those  who  are  educated  to  any  manufac- 
turing business,  can  rarely  employ  themselves  upon  any 
thing  else.  If  the  laborers  at  any  of  our  manufactories 
were  employed  only  half  the  time,  their  wages  must  be 
doubled  ;  for  their  families  must  be  supported,  one  day 
as  well  as  another,  and  thus  the  interest  of  the  whole 
investment  must  be  charged  upon  half  the  quantity  of 
product.  These  causes,  together  with  the  loss  of  skill 
in  workmen,  would  more  than  double  the  price  of  prod- 
ucts, and  would,  of  necessity,  carry  back  the  division 
of  labor  to  its  less  perfect  state. 

But  this  demand  must  depend  upon  several  circum- 
stances.    The  most  important  of  these  are  the  following  : 

i .  The  number  of  the  consumers.  When  the  numbe' 
of  inhabitants  is  small,  as  in  a  newly  settled  country,  or 
in  in  isolated  situation,  the  demand  must,  of  course, 
correspond  to  their  number.  One  hundred  men  will  re- 
quire but  one  tenth  as  many  hats  or  shoes  as  one  thou- 
8 


86  LIMITATIONS    TO    DIVISION     OF    LABOR. 

sand  men.  It  is  on  this  account  that  wealth  accumulates 
most  rapidly  on  navigable  waters,  because  the  market  of 
the  producers  is  not  limited  to  themselves,  but  may  be 
easily  extended  to  other  places. 

2.  By  the  wealth  of  the  inhabitants.  Demand  does 
not  signify  simple  desire  for  an  article,  but  desire  for  it, 
combined  with  the  ability  and  willingness  to  give  for  it 
what  will  remunerate  the  producer.  Hence,  the  greater 
the  ability,  in  a  given  population,  to  remunerate  the  pro- 
ducer, the  greater  will  be  the  demand.  The  demand 
for  hats,  in  a  population  of  one  thousand  men,  would  be 
limited  to  those  persons  in  that  population  who  were  ublt 
to  buy  a  hat.  The  larger  the  proportion  of  such  indi- 
viduals, the  better  it  would  be  for  the  hatter,  and  for 
every  other  producer.  Hence  we  see,  that  every  indi- 
vidual is  interested  in  the  prosperity  of  every  other  indi- 
vidual in  the  community. 

3.  By  the  cost  of  the  article.  The  greater  the  cost 
of  the  product,  the  smaller  will  be  the  number  of  per- 
sons who  are  able  to  purchase  it.  Hence,  the  less  will 
be  the  demand  ;  and  hence,  also,  the  less  opportunity 
will  there  be  for  division  of  labor.  And,  besides,  the 
greater  the  cost  of  tlie  article,  the  greater  amount  of 
capital  is  required  in  order  to  produce  it  by  division  of 
labor.  Hence,  this  cause  operates  in  two  ways  to  pre- 
vent the  employment  of  this  means  of  effecting  the  re- 
duction of  price.  Thus,  if  a  community  consist  of  one 
thousand  men,  and  of  these,  one  hundred  be  worth  one 
thousand  dollars  per  year  ;  four  hundred  be  worth  five 
hundred  dollars  ;  and  the  remainder  be  worth  but  two 
hundred  and  fifty  dollars  per  year  ;  and  an  article  be 
produced  within  the  reach  of  only  the  first  of  these  class- 
es, it  can  have  but  one  hundred  purchasers  ;  if  it  come 
within  the  reach  of  the  second  class,  it  will  have  five 
hundred  ;  and  if  it  come  within  the  reach  of  the  third 
class,  It  will  have  one  thousand  purchasers.  Hence  ii 
is,  that  division  of  labor  is  but  sparingly  used  in  the 
manufacture  of  rich  jewelry,  and  in  articles  of  expensive 
luxury  ;  while  it  is  so  universally  used  in  the  production 
of  all  articles  of  common  use.     Hence  we  see,  that  the 


LIMITATIONS    TO    DIVISION    OF    LABOR.  87 

benefits  of  the  use  of  natural  agents  and  of  division  of 
labor,  are  vastly  greater  and  more  important  to  the  mid- 
dling and  lower  classes,  than  to  the  rich.  These  means 
of  increased  production,  reduce  the  cost  of  the  neces- 
saries and  of  the  essential  conveniences  of  life  to  the 
lowest  rate,  and,  of  course,  bring  them,  as  far  as  possi- 
ble, within  the  reach  of  all. 

4.  By  facilities  of  transportation.  This  is  evident, 
from  what  has  been  said.  The  cost  of  an  article  de- 
pends not  only  on  the  cost  of  its  original  production, 
but  also  upon  the  cost  necessary  to  bring  it  to  the  con- 
sumer. Coal  may  be  very  cheap  at  a  coal  mine,  but  if 
it  must  be  borne  on  the  shoulders  of  men  to  the  consu- 
mer, it  would,  at  a  few  miles  from  the  mine,  become  so 
dear,  that  no  one  would  be  able  to  use  it.  The  demand 
would  be  so  small,  that  there  would  be  no  profit  either  in 
investing  capital  in  the  machinery,  or  in  employing  di- 
vision of  labor  to  raise  it  from  the  mine.  But  if  horses 
be  used  to  transport  it  to  the  consumer,  the  demand 
will  increase.  Again,  if,  for  horses,  canals  and  railroads 
be  substituted,  it  will  become  cheap,  and  the  demand 
will  increase  still  more  ;  and,  with  every  such  improve- 
ment, that  circle  of  consumption  expands,  of  which  the 
mine  is  the  centre.  The  same  principle  applies  to  man- 
ufactures, specially  those  of  iron  or  heavy  ware,  and  it 
applies  just  in  proportion  as  transportation  forms  a  large 
or  small  part  of  the  cost  to  the  consumer.  And  thus, 
in  general,  we  see  the  principle  on  which  facilities  for 
internal  communication  improve  the  condition  of  both 
the  other  branches  of  industry.  For  this  reason,  the 
price  of  land  and  grain,  rises  in  a  district  through  which 
a  canal  or  a  railroad  passes  ;  and,  for  the  same  reason, 
manufactories  may  at  one  time  be  successfully  established 
in  situations  where  they  at  another  time  would  have  been 
useless,  if  not  ruinous  to  the  proprietor.  And,  still  more 
g,onerally,  we  see  the  manner  in  which  all  the  branches 
of  labor  assist  each  other.  A  railroad  or  a  canal  can 
never  profitably  be  constructed  in  a  country  where  there 
is  nothing  to  be  transported.  But  where  agriculture, 
manufactures,  and  commerce  are  productive,  and  hence 


88  DIVISION    OP    NATIONAL    LABOR. 

require  a  large  amount  of  transportation,  there,  these 
facilities  are  immediately  in  demand.  Were  Liverpool 
and  Manchester  to  decline,  of  what  use  would  be  the 
railroad  between  them  ?  And,  on  the  other  hand,  the 
railroad  between  them,  by  reducing  the  cost  of  all  arti- 
cles bought  and  sold,  diminishes  the  cost  of  living  in 
both  places,  enables  the  producer  to  come  into  market 
with  greater  advantages,  increases  the  profit  in  all  kinds 
of  industry,  facilitates  the  accumulation  of  capital,  and 
thus  adds  greatly  to  the  annual  revenue  of  both  cities. 

II.  I  have  thus  far  considered  the  division  of  labor  as 
it  exists  among  the  inhabitants  of  the  same  place,  and  in 
the  same  situation.  The  same  principle,  however,  ap- 
plies to  people  of  different  districts.  Here  it  is  not 
merely  a  matter  of  choice,  but,  in  a  great  measure,  of 
necessity  ;  that  is,  it  is  required  by  the  very  conditions 
of  our  being. 

It  is  manifest,  that  the  different  portions  of  the  same 
country  possess  different  facilities  for  producing  the  ob- 
jects of  human  desire.  No  district  possesses  advantages 
for  producing  every  thing  ;  but  almost  every  district 
possesses  peculiar  facilities  for  producing  something. 
Now,  natural  advantages  are  clearly  nothing  more  than 
means  of  increased  productiveness  of  labor  in  the  crea- 
tion of  any  particular  product.  If  one  soil  will  produce 
forty  bushels  of  wheat  to  the  acre,  with  the  same  labor 
that  another  will  produce  twenty,  the  labor  upon  the  first 
is  twice  as  productive  as  that  upon  the  second  ;  that  is, 
the  owner  of  the  one  has  a  machine  by  which  he  can, 
with  the  same  labor,  produce  twice  as  much  as  his 
neighbor.  But  perhaps  the  soil  which  will  produce  only 
twenty  bushels  of  wheat,  will  produce  forty  bushels  of 
corn  per  acre,  while  the  other  soil  will  produce  only 
twenty.  This  second  soil  is,  therefore,  an  instrument 
which  gives  a  double  productiveness  to  labor  in  the  rais- 
ing of  corn.  Now,  it  is  manifest,  that  if  each  one  de- 
votes himself  to  the  production  of  that  for  which  nature 
has  given  him  peculiar  facilities,  his  amount  of  produc- 
tion will  be  greater,  he  will  himself  be  richer,  and  the 
whole  community  will  be  supplied  at  a  diminished  cost 


DIVISION    OF    NATIONAL    LABOR.  89 

Suppose  that  each  occupied  twenty  acres,  and  each  pro- 
duced the  crop  for  which  he  had  the  greater  advantages  ; 
!he  resuh  would  be  20X40  =  800  of  wheat,  and  the 
same  of  corn  ;  =  800  bushels  of  wheat  and  800  of  corn. 
Suppose,  again,  they  divided  their  crops,  and  each  ap- 
propriated ten  acres  to  wheat  and  ten  to  corn  ;  the  result 
would  be,  10X40  =  400  of  wheat,  and  10X20  =  200  of 
corn  ;  and  10X40  =  400  of  corn,  and  10X20  =  200  ol 
wheat  ;  that  is  600  of  wheat  and  600  of  coi  n  ;  that  is, 
there  would  be  600  instead  of  800  bushels  of  each 
raised,  and  the  loss  to  both,  and  to  the  community, 
would  be  200  bushels  of  each  a  year.  By  so  much 
would  they  both  be  poorer  than  by  devoting  themselves 
wholly  to  that  product  for  which  each  had  the  greatest 
natural  advantages. 

Or,  to  take  another  case.  Suppose  one  district  rich 
in  soil,  and  adapted  to  the  production  of  wheat,  but  level 
and  far  inland,  and,  therefore,  unadapted,  by  position, 
and  want  of  the  proper  natural  agents,  to  the  production 
of  manufactures  ;  and  another  district,  on  the  sea-board, 
hilly  and  sterile,  adapted  to  manufactures,  but  unadapted 
to  the  culture  of  wheat.  On  the  first,  with  one  day's 
labor,  a  man  may  raise  two  bushels  of  wheat,  but  could 
produce  but  four  yards  of  cloth.  On  the  other,  by  the 
same  labor,  a  man  can  produce  twelve  yards  of  cloth 
but  can  raise  but  one  bushel  of  wheat.  Now,  it  is  man- 
ifest, that  by  each  district's  devoting  its  labor  to  that 
kind  of  production,  for  which  it  has  the  greatest  natural 
facilities,  the  production  of  the  whole  country  will  be 
increased.  It  is  also  evident,  that  a  man  in  the  wheat 
district  will  provide  himself  with  cloth  at  a  cheaper  rate, 
by  raising  wheat,  and  procuring  cloth  by  exchange,  than 
by  manufacturing  it  himself;  and  on  the  other  hand,  that 
the  manufacturer  will  provide  himself  with  wheat,  at  a 
much  cheaper  rate,  by  making  cloth,  than  by  raising 
wheat  himself.  Thus,  by  this  form  of  division  of  labor, 
the  productive  power  of  both  is  increased  ;  their  desires 
are  gratified  at  the  expense  of  less  labor  ;  and  thus,  both 
81  e  rendered  richer  and  happier. 

Ail  this  "eems  obvious,  if  only  the  several  districts 
8* 


90  DIVISION    OF    NATIONAL    LABOR. 

of  the  same  country  be  compared.  And  it  is  obvious, 
because  every  one  perceives  that  God  has  bestowed  upon 
different  districts,  of  the  same  country,  different  advan- 
tages, which  it  is  for  the  interest  of  tliat  country  that 
each  district  should  improve  to  the  utmost.  But  every 
one  may  see,  that  the  same  principles  apply  to  difTerenl 
nations  inhabiting  the  different  quarters  of  the  globe. 
The  separation  of  the  earth  into  warring  nations,  is  noth- 
ing but  the  arbitrary  work  of  nian  ;  it  alters  neither  the 
qualities  nor  the  relations  which  God  has  given  to  things, 
nor  the  laws  under  which  he  has  constituted  man.  If  a 
man  own  a  farm,  of  which  one  part  is  suited  only  to 
tillage,  and  another  part  only  to  grazing,  and  he  divide 
it,  and  sell  the  pasture  land  to  his  neighbor  ;  this  does 
not  alter  the  nature  of  the  soil.  Will  it  not  be  just  as 
profitable  to  appropriate  each  part  to  the  purpose  for 
which  God  designed  it,  after  the  purchase,  as  before  ? 

Every  man  needs,  for  the  gratification  of  his  innocent 
desires,  nay,  for  his  conveniences  and  even  necessaries, 
the  productions  of  every  part  of  the  globe.  To  be 
convinced  of  this,  we  have  only  to  enun)erate  the  aiti- 
cles  which  furnish  our  houses,  the  food  that  covers  our 
tables,  and  the  raiment  which  clothes  our  bodies.  How 
greatly  would  all  our  means  of  happiness  be  diminished, 
were  we  deprived  of  the  iron,  the  furs,  and  the  hemp  of 
the  North  ;  the  coffee,  teas,  sugar,  rice,  fruits,  and  spi- 
cks of  the  South  ;  or  the  wool,  the  wheat,  and  the  man 
ufactures,  of  ten)perate  climates.  Every  one  must  be 
convinced  that  the  happiness  of  every  man  is  increased 
in  proportion  as  he  is  furnished  with  the  greatest  number 
of  these  objects  of  desire  ;  and  furnished  with  them,  in 
their  greatest  perfection,  and  at  the  cheapest  rate. 

But,  it  is  evidently  the  will  of  our  Creator,  that  but 
few  of  these  objects,  every  one  of  which  is  necessary 
to  the  happiness  of  every  individual,  should  be  produced 
except  in  particular  districts.  Others,  if  they  can  be 
produced  in  several  places,  can  be  produced  much  more 
cheaply,  and  in  greater  perfection,  in  some  places,  than 
/  in  others.  Every  part  of  the  globe  possesses  peculiar 
l^    adt'antages  for  the  production  of  something  ;  but  no  pari 


DIVISION    OF    NATIONAL    LABOR.  91 

possesses  advantages  for  the  production  of  every  thing,  f 
Hence,  we  see,  on  the  principle  illustrated  above,  that 
the  annual  production  of  the  globe  will  be  greatest  ;  that 
is,  there  will  be  the  largest  amount  falling  annually  to 
the  share  of  every  individual  ;  that  is,  every  individua 
will  be  richer  and  happier,  when  each  portion  of  the 
globe  devotes  itself  to  the  creation  of  those  products  for 
which  it  has  the  greatest  natural  facilities.  H  a  man  in 
New  York  can  produce,  by  one  day's  labor,  one  hun- 
dred pounds  of  flour,  but  could  not  produce  more  than 
one  ounce  of  coffee  ;  and  a  man  in  Cuba  can  produce 
twenty-five  pounds  of  coffee,  but  cannot  produce  more 
than  one  pound  of  flour,  and  they  exchange,  as  we  have 
before  seen  they  must  exchange,  labor  for  labor  :  the 
one  will  produce,  by  a  day's  labor,  twenty-five  pounds 
of  coffee,  instead  of  an  ounce  ;  and  the  other,  one  hun- 
dred pounds  of  flour,  instead  of  a  pound.  Is  not  this 
better  than  for  the  New  York  farmer  to  raise  his  coffee 
in  a  hot-house,  at  the  expense  of  a  day's  labor  for  an 
ounce  ;  and  the  West  Indian  to  raise  his  wheat  on  the 
mountains,  at  the  expense  of  a  day's  labor  for  a  pound. 
Such  are  the  advantages  of  that  division  of  labor  sug- 
gested by  geographical  position. 

And  the  final  cause  of  all  this  is  evident.  God  in- 
tended that  men  should  live  together  in  friendship  and 
harmony.  By  thus  multiplying  indefiititely  their  wants, 
and  creating  only  in  particular  localities,  the  objects  by 
which  those  wants  can  be  supplied,  he  intended  to  make 
them  all  necessary  to  each  other  ;  and  thus  to  render  it 
no  less  the  interest,  than  the  duty  of  every  one,  to  live 
in  amity  with  all  the  rest. 

Nor  is  the  application  of  this  principle  confined  lo 
geographical  localities.  The  simple  fact  that  a  nation 
possesses  facilities,  be  they  either  natural  or  acquired, 
for  (Teating  any  product  at  a  cheaper  rate  than  any 
other  nation,  is  a  reason  why  -hat  nation  should  devote 
itself  to  the  creation  of  that  product ;  and  why  anothei 
nation  should,  for  the  same  reason,  improve  its  own 
peculiar  advantages.  Thus,  there  are  certain  states  oi* 
society,  and  a  certain  amount  of  accumulation  of  cap-. 


92  DIVISION    OP    NATIONAL    LABOR. 

ilal,  most  favorable  to  the  creation  of  certain  [»roducts. 
A  nation  in  this  state,  and  with  this  accumulation,  can 
furnish  these  products  cheaper  than  her  neighbors ;  and 
this  is  a  reason  they  should  purchase  them  of  her. 
Could  not  one  of  our  old  States  supply  one  of  the  new 
States  with  manufactures,  cheaper  than  the  new  State 
could  produce  tliem  itself  ?  And  is  not  this  a  reason 
why  the  new  State  should  procure  them  by  exchange, 
ralher  than  by  direct  production  ?  Is  it  not  cheaper  for 
an  Indian  to  buy  a  rifle  of  an  European,  than  to  attempt 
to  make  one  for  himself  ? 

This  is,  however,  by  no  means  to  assert  that  such 
arrangements  and  relations  are  to  be  permanent.  As 
a  country  accumulates  fixed  capital,  it  creates  its  own 
facilities  for  creating  almost  every  kind  of  manufactured 
product.  One  nation  will  naturally  begin  to  do  this  at 
the  same  point  of  accumulation  at  which  another  began 
to  do  it.  And  the  way  in  which  to  arrive  at  this  point 
the  soonest,  is  to  become  rich  as  fast  as  possible  ;  that 
is,  to  buy  as  cheap  as  we  can,  or,  in  other  words,  to 
procure,  annually,  as  many  objects  of  desire  as  possible, 
for  a  given  amount  of  labor.  A  tribe  of  Indians  would 
much  sooner  be  able  to  make  rifles  for  itself,  by  pur- 
chasing, at  first,  rifles  of  an  European,  than  by  deter- 
mining that  it  would  never  use  rifles,  until  it  could  man- 
ufacture them  for  itself.  As  the  use  of  a  rifle  would 
render  industry  more  productive,  and  thus  render  the 
tribe  richer,  it  would  bring  them  one  step  nearer  to  that 
degree  of  accumulation,  at  which  they  might  begin  to 
make  rifles  for  themselves.  But  the  resolution  not  to 
purchase  of  others,  would  have  no  such  tendency,  inas- 
much as  it  would  do  nothing  whatever  towards  accum- 
ulating production  ;  but  would,  on  the  contrary,  shut 
them  out  from  the  very  means  offered  them  for  most 
rapidly  benefiting  their  condition. 

To  sum  up  what  has  been  said.  It  will  be  seen  that 
production  will  be  increased  ;  that  is,  men  will  be 
richer,  and  therefore  may  be  happier,  as  the  following 
conditions  are  complied  with  : 

1.  As  the  laws  of  nature,  designed  by  our  Creator 
lor  our  benefit,  are  understood  ; 


EFFECTS    OF    INCREASED    PRODUCTIVLKESS.       93 

2.  As  the  means  are  devised  for  availing  ourselves, 
m  the  most  successful  manner,  of  the  utility  of,  these 
laws  ; 

3.  As  the  human  labor  necessary  to  be  expended,  is 
so  arranged  as,  with  a  given  expenditure,  to  produce  the 
greatest  and  most  perfect  result ;  and 

4.  As  the  inhabitants  of  the  earth,  in  different  locali- 
ties, devote  themselves  most  exclusively  to  the  produc- 
tion of  those  objects  of  desire,  for  the  production  of 
which  they  have  received, 'either  directly  or  indirectly, 
from  their  Creator,  the  greatest  facilities. 

Or,  still  more  generally,  production  will  be  abundant ; 
that  is,  man  will  enjoy  the  means  of  physical  happiness, 
in  proportion  to  his  individual  industry,  both  of  body 
and  mind  ;  and  to  the  degree  of  harmony  and  good 
feeling  which  exists  between  the  individuals  of  the  same 
society  ;  and  also  between  the  different  societies  them- 
selves. 


SECTION  IV. 

EFFECTS  OF  THE  INCREASED  PRODUCTIVENESS  OP 
HUMAN  INDUSTRY. 

This  subject  has  been  already  so  frequently  alluded 
to,  and  all  the  points  on  which  it  depends,  so  distinctly 
stated,  that  it  will  not  be  necessary  to  examine  it  so 
fully,  as  might  otherwise  be  required. 

The  result  of  industry  applied  to  capital  is  product, 
value,  or  the  means  of  gratifying  human  desire.  The 
result  of  increased  productiveness  of  human  industry,  is, 
with  the  same  labor,  increased  product,  value,  or  means 
of  gratifying  human  desire.  'J'hat  is,  in  general,  in- 
creased productiveness  is  equivalent  to  increased  means 
of  human  happiness.  This  simple  statement  would 
seem  .sufficient  to  explain  the  whole  subject.     In  order. 


94       EFFECTS    OF    INCREASED     PRODUCTIVENESS. 

however,  to  obviate  any  objections  that  may  arise,  we 
will  p/oceed  to  show  its  practical  operation,  by  several 
illustrations. 

Take  the  case  of  a  single  individual.  Suppose  a 
man,  by  the  same  amount  of  labor  that  he  spent  last 
year,  to  be  able  this  year  to  create  twice  as  much  value. 
Suppose  that  a  farmer  has  twice  as  large  a  harvest ; 
that  is,  that  his  instrument  is  twice  as  good  this  year  as 
it  was  last  year.  The  result  is,  he  will  be  able  to 
satisfy  the  desire  which  thaf  product  gratifies,  twice  as 
abundantly  as  he  did  last  year.  He  will  have  more  to 
exchange  with  other  producers,  and  hence  he  will  be 
able  to  gratify  other  desires  more  abundantly.  He  will 
be  able  to  make  exchanges  which  were  before  out  of  his 
power  ;  hence,  he  will  be  able  to  add  to  his  mode  of 
living,  new  means  of  happiness.  And,  on  the  other 
hand,  as  he  is  able  to  make  exchanges  with  others  with 
whom  it  was  before  impossible,  others,  in  return,  are 
able  to  avail  themselves  of  his  product  or  means  of  hap- 
piness, who  were  before  unable  to  do  so.  Hence,  he 
is  not  only  happier  himself;  but  the  very  means,  by 
which  he  becomes  so,  render  him  the  instrument  of 
greater  happiness  to  others.  Hence,  it  is  a  benefit  to  a 
whole  neighborhood,  for  a  single  member  of  it  honestly 
to  become  rich.  In  other  words,  increased  productive- 
ness, in  one  branch  of  labor,  increases  productiveness 
in  every  branch  of  labor. 

Let  us  call  this  first  individual  A,  and  suppose  that 
before  the  productiveness  of  his  labor  had  been  in- 
creased, he  exchanged  with  another  individual,  B  ,  on 
equal  terms.  If  the  labor  of  A  and  B  were  10  per 
day,  they  would  exchange  with  each  other  at  the  rate  of 
10  for  10.  But,  suppose  now,  that  by  some  new  in- 
vention, A's  labor  produced  20  per  day.  He  would 
offer  to  exchange  on  the  same  terms  as  before,  but  he 
would  offer  20,  and  expect  from  B,  20  in  return.  But, 
in  consequence  of  the  inferior  productiveness  of  B's 
labor,  he  would  not  be  able  to  purchase  so  much  ;  he 
could  afford  to  buy  only  10,  as  before.  A,  therefore, 
in  order  to  induce  him  to  exchange,  that  is,  to  buy 


EFFECTS    OF    INCREASED    PRODUCTIVENESS.        95 

would  abate  his  price  ;  that  is,  would  oiTer  to  exchange 
on  better  terms,  and  would  oiler  him  at  the  rate  of  20 
for  15,  or  in  some  such  proportion.  What  B  would  not 
purchase  at  the  rate  of  10  for  10,  he  might  be  willing  to 
purchase  at  the  rate  of  1 5  for  20.  Thus,  we  see,  thoy 
would,  in  this  case,  share  the  benefit  between  them. 
But  let  the  labor  of  B  now  be  increased  in  productive- 
ness, so  that  it  shall  be  equal  to  that  of  A  ;  that  is,  be 
also  at  the  rate  of  20  per  day.  They  will  now  exchange 
at  the  same  rate  as  before  ;  that  is,  ai  the  rate  of  20  for 
20,  with  this  difference,  that  for  one  day's  labor,  they 
will  both  have  twice  as  many  objects  of  desire  as  be- 
fore, or  as  many  objects  of  desire,  with  half  a  day's  la- 
bor ;  that  is,  both  will  be  twice  as  rich  as  before.  Thus, 
the  increased  productiveness  of  B,  is  now  a  benefit  to 
A,  inasmuch  as  he  now  receives  20  for  20,  when,  be- 
fore, he  only  received  15  for  20.  Now  it  needs  but  a 
little  reflection  to  perceive,  that  the  case  of  A  and  B, 
is  the  case  of  the  whole  community. 

But  the  case  is  made  still  stronger,  when  the  effect 
of  compeiition  is  taken  into  the  account.  Let  the  pro- 
ductiveness of  labor  in  any  department  be  ever  so  great, 
where  labor  and  capital  are  free,  competition  will  always 
reduce  profit  in  one  department  to  the  same  average  per 
cent,  that  it  affords  in  other  departments.  Hence,  let 
the  productiveness  of  labor  and  capital,  in  any  one  mode 
of  employment,  be  ever  so  great ;  interest  and  wages, 
in  that  employment,  will  be  no  higher  than  they  are, 
other  things  being  equal,  in  other  employments.  That 
is,  while  the  capitalist  and  the  laborer  receive  the  same 
mterest  and  wages  as  the  rest  of  the  community  ;  in  other 
words,  while  the  community  pay  no  more  for  this  capi- 
tal and  labor  than  they  pay  for  any  other,  they  receive  a 
greater  amount  of  value  in  exchange,  and,  as  nuich 
more,  as  the  productiveness  of  that  labor  and  capita) 
has  been  increased.  Thus,  capital  and  labor  in  the  cot- 
ton manufacture  is  not  better  paid,  upon  an  average,  than 
in  other  modes  of  investment  and  industry.  Jf  it  were, 
capital  and  labor  would  flow  into  it,  until  the  ecpiilibrium 
was  restored.      But,  while  this  is  tlu   fact,  we  obtain  a 


96       EFFECTS    OF    IIVCREASED    PRODUCTIVENESS. 

yard  of  cotton  cloth  for  one  fourth  the  price,  or  at  one 
fourth  of  the  labor,  at  which  we  formerly  obtained  it  : 
that  is,  we  receive  four  times  as  much  as  formerly,  m 
return  for  what  we  pay  for  the  cost  and  labor  of  making 
cotton  cloth.  And  thus,  over  the  whole  world,  every 
instance  of  increased  productiveness,  whether  it  be  from 
the  use  of  natural  agents,  or  from  the  division  of  labor, 
whether  in  our  own  country,  or  in  another  country,  if  we 
choose  to  avail  ourselves  of  it,  enables  every  man,  by 
paying  the  producer  the  same  as  before,  to  procure  a 
larger  amount  of  value  ;  that  is,  of  objects  for  the  grat- 
ification of  desire  ;  that  is,  enables  every  man  to  become 
both  richer  and  happier. 

The  above  remarks  will,  I  hope,  be  sufficient  to  il- 
lustrate the  general  principle.  As,  however,  there  are 
several  consequences  resulting  from  increased  produc- 
tiveness of  human  labor,  especially  from  the  use  and 
improvement  of  natural  agents,  which  seem  at  first  view 
to  be  at  variance  with  what  we  have  here  advanced,  it 
may  be  necessary  to  pursue  the  results  somewhat  more 
minutely,  and  to  consider  the  objection  commonly  made, 
that  the  use  of  labor-saving  machinery  is  prejudicial  to 
the  interests  of  the  laboring  classes. 

It  may,  however,  be  here  premised,  that  the  objection 
made  against  natural  agents,  is  not  to  their  use,  but  to 
their  improvement.  Men  object  to  the  use  of  a  spinning 
jenny,  but  not  to  the  use  of  a  spinning  wheel.  They 
dislike  a  rake  by  horse  power,  but  do  not  dislike  a  rake. 
•  liut  every  one  must  see,  that  this  sort  of  objection,  if  it 
be  founded  in  truth,  is  by  no  means  sufficiently  exten- 
sive. A  spinning  wheel,  or  a  hand  loom,  or  a  hand 
rake,  is  a  labor  saving  machine  ;  and  it  involves  the  use 
of  natural  agents,  just  as  truly  as  a  spinning  jenney,  a 
,  power  loom,  or  a  horse  rake.  If  the  use  of  natural 
/  agents  be  injurious,  we  should  abandon  them  altogether, 
and  spin,  and  weave,  and  rake,  with  our  fingers.  But 
if  this  would  be  unwise,  and  it  be  conceded  that  we 
must  use  natural  agents,  in  some  form  or  other,  why  not 
use  the  best  that  we  can  procure  ;  that  is,  the  best  that 
God   has  given   us  ?     I^,  as  all  must  allow,  the  use  of 


EFFECTS    OF    INCREASED    PRODUCTIVENESS.        97 

them,  up  to  a  certain  point,  has  conferred  an  incalcula- 
ble benefit,  what  reason  have  we -to  suppose,  that  addi- 
tional improvement  in  the  use  of  them  will  noi  confer 
still  additional  benefit. 

But,  passing  this,  I  proceed  to  consider  the  effects  of 
increased  productiveness  of  labor,  both  upon  Producers 
and  Consumers. 

T.    The  effects  of  natural  agents  upon  Producers. 

These  are  either  immediate,  or  ultimate. 

1.  Immediate.  It  is  said  that  every  improvement  in 
machinery  enables  the  work  to  be  done  by  fewer  labor* 
ers,  and  hence  many  persons  are  thrown  out  of  employ- 
ment ;  and  that  every  change  in  the  manner  of  labor, 
deprives  many  pefsons  of  the  use  of  that  skill,  which  is 
their  whole  means  of  subsistence. 

So  far  as  change  in  the  manner  of  labor  is  concerned, 
but  little  need  be  said,  as  this  is  but  a  temporary  incon- 
venience. If  a  new  kind  of  work  is  to  be  done,  some 
persons  must  learn  to  do  it,  and  must  be  paid  for  learn- 
ing. If  a  man  do  not  choose  to  learn  it,  although  he 
would  be  paid  for  learning  it,  and  be  supported  by  his 
labor,  after  he  has  learned  it,  it  is  his  own  fault.  He 
may  quarrel  with  his  own  obstinacy,  but  he  has  nothing 
else  to  blame.  Nor  is  the  simple  change  of  employ- 
ment a  peculiar  hardship.  Few  men  pass  through  life, 
without,  at  some  time  or  other,  materially  modifying 
Mieir  mode  of  employment,  from  choice,  instead  of  from 
necessity. 

The  main  difficulty,  therefore,  which  is  supposed  to 
result  from  the  use  of  improved  methods  of  production, 
IS,  that  they  employ  a  less  number  of  laborers  :  and, 
hence,  that  many  laborers  are  thrown  out  of  employ* 
incnt. 

In  reply  to  this  it  might  be  asked,  what  is  the  testi- 
mony of  facts,  in  this  case.  Improvements  in  machiniv 
ry  have  been  going  on,  ever  since  the  creation.  His 
the  demand  for  labor  diminished  ?  Improvements  have 
been  made  in  particular  districts.  Have  the  laborers 
been,  by  these  means,  driven  away ;  or,  on  the  contra 
9 


9ft       EFFECTS    OF    INCREASED    PRODUCTIVENESS. 

I'  ry,  are  not  these   the  very  districts,  to  which  laboiers 

\  inevitably  resort  for  employment  ? 

But,  aside  from  this,  let  us  examine  the  assertion,  thai 
some  laborers  are  thrown  out  of  employment.  Let  us, 
howjver,  first  endeavor  to  ascertain  how  great  the  evil  is. 

1 .  It  is  not  universal.  The  improved  mode  of  pro- 
duction always  requires  some  labor,  and,  of  course,  a 
portion  of  those  formerly  employed  must  still  find  em- 
ployment. .  To  these,  there  results  no  other  disadvan- 
tage, than  that  of  a  change  in  the  mode  of  employment; 
but  with  the  meliorating  circumstances  of  higher  wages 
and  less  fatiguing  labor. 

2.  It  is,  by  necessity,  gradual.  Improvements  in 
machinery  are  made  by  slow  degrees.  Although  the 
total  change  may  show  a  greatly  increased  productive- 
ness of  labor,  yet  no  one  single  change  is  often,  of  it- 
self, great  enough  to  produce  a  great  change  in  the  de- 
mand for  laborers.  Again  :  Let  the  change  be  ever  so 
great,  it  cannot  be  incroduced  at  once,  over  a  whole  na- 
tion. Hence,  its  effects  will  be,  at  first,  to  reduce  the 
wages  of  those  engaged  in  the  former  methods  of  nianu- 
facturing.  The  consequence  will  be,  that  no  new  la- 
borers will  learn  the  trade.  This  will  tend  to  keep  up 
the  wages  of  those  who  remain  in  it.  And,  lastly  :  If 
a  new  instrument  is  to  be  employed,  there  must  be  an 
additional  number  of  men  employed  to  manufacture  it. 
This  will,  of  course,  require  an  additional  number  of 
laborers,  who  must  be  withdrawn  from  other  employ- 
ments. This  will  tend  to  raise  the  price  of  labor,  and, 
of  course,  either  to  furnish  employment  for  those  nlio 
wish  to  leave  the  former  occupation,  or  else  to  keep  (ip 
the  wages  of  ihose  who  choose  to  remain  in  it. 

3.  The  infelicity  here  spoken  of,  is  no  other  than  ihat 
which  belongs  to  the  tenure  of  all  property  whatsoever. 
Skill  and  labor,  as  well  as  capital,  are  always  liable,  in 
the  revolutions  of  society,  to  depreciate  in  value,  or  even 
to  become  worthless.  "  Riches  make  to  themselves 
wings,  and  flee  away."  The  wisdom  of  man,  since  the 
creation,  has  never  yet  discovered  any  link  strong  enough 
»o  connect  a  human  being,  indissolubly,  with  any  sublu- 


EFFECTS  OF  INCREASED  PRODUCTIVENESS.   99 

nary  possession.  The  laborer,  therefore,  in  this  case, 
holds  his  property  precisely  as  any  other  man  holds  it, 
and  is  subject  to  no  peculiar  hardship. 

Let  us  however  proceed  to  consider  the  ultimate  ef- 
fects of  increased  productiveness  upon  producers. 

1.  The  producer  shares  with  the  rest  of  the  commu- 
nity in  ihe  benefit  derived  from  increased  productiveness ; 
that  is,  if  he  earn  the  same  wages  as  before,  he  is  richer ; 
and,  if  he  earn  less,  he  is  less  poor  than  he  would  have 
been,  if  no  such  change  had  taken  place.  That  is  to 
say,  money,  or,  in  other  words,  a  given  amount  of  labor, 
is  capable  of  procuring  for  him  a  greater  amount  of  ob- 
jects of  desire,  than  before. 

2.  From  this  increased  productiveness,  there  must  be, 
throughout  the  whole  community,  an  increased  demand 
Jor  labor.  Suppose  a  community  of  one  hundred  men 
to  acquire,  by  their  labor  and  capital,  every  year,  just 
enough  to  support  themselves,  after  defraying  the  ex- 
penses of  their  several  establishments.  So  long  as  this 
state  of  things  continued,  there  would  be  no  increased 
demand  for  laborers  ;  for  there  would  bo  no  additional 
capital  with  which  to  maintain  them.  The  young  must 
therefore  emigrate,  or  else  there  will  be  a  competition 
among  laborers  for  work,  and  thus  wages  will  fall.  But, 
suppose,  that  by  some  new  mode  of  increased  produc- 
tiveness, the  capital  be  increased  in  a  single  year,  twen- 
ty-five per  cent.,  there  will  then  be  a  demand  for  the  in- 
dustry of  a  greater  number,  say  twenty-five  additional 
laborers  ;  since  this  additional  capital  can  produce  noth- 
ing, unless  it  be  united  with  labor.  If  there  be  not 
twenty-five  additional  laborers  to  be  immediately  pro- 
cured, wages  must  rise,  because  there  will  be  a  compc*. 
lition  among  capitalists  for  labor  ;  and  children  and  pcr< 
sons,  who  with  the  former  prices  could  earn  nothing, 
w  II  now  be  employed.  And,  if  the  demand  for  labor, 
arising  from  this  increase  of  capital,  could  not  be  thus 
supplied,  those  engaged  in  less  profitable  employment  in 
other  districts',  and  other  countries,  would  come  in  to 
supply  the  doficicnry.  Suth  is  always  seen  .o  be  the 
fact.     Population  follows  capital.     It  goes  where  capi* 


JOO    EFFECTS    OF    INCREASED    PR0DUCT1FENES8. 

tal  goes,  and  it  concentrates  where  capital  accumulates, 
and  it  retires  when  capital  retires.  And  hence,  in  a 
whole  country,  where  the  number  of  Inhabitants  is  limit- 
ed, the  increase  of  capital  must  raise  the  rate  of  wages. 
And  hence,  by  just  so  much  as  increased  productive- 
ness of  labor  increases  the  amount  of  capital,  it  must 
also  tend  to  raise  the  price  of  labor  throughout  a  whole 
country.  That  is  to  say,  the  obvious  tendency  of  the 
use  of  natural  agents  is,  to  increase  the  wages  of  labor- 
ers in  general. 

3.  But,  the  tendency  of  the  use  of  machinery  is  to 
increase  the  wages  of  laborers,  in  that  very  department 
of  industry,  in  which  they  are  employed.  The  reason 
for  this  is  obvious.  Reduction  of  price  produces  an 
additional  demand,  more  than  sufficient  to  compensate 
for  the  diminished  amount  of  labor  necessary  for  the 
creation  of  the  particular  product.  That  this  must  al- 
ways be  the  case,  can,  I  think,  be  conclusively  rhow/i. 

Suppose  that  with  the  present  machinery,  one  hi  iidred 
men  are  able  to  manufacture  cotton  cloth  at  fif:y  cents 
per  yard,  and  that  the  amount  which  they  produce  is 
precisely  sufficient  to  supply  the  wants  of  the  diairict  for 
which  they  labor.  At  this  price,  no  consumers,  but 
those  worth  one  thousand  dollars  per  year,  can  afford  to 
purchase  cotton  cloth,  and,  of  course,  the  de.nand  is 
limited  exclusively  to  them.  Suppose  now,  that  im- 
proved machinery  enables  fifty  men  to  manufacture  ai- 
large  an  amount  of  cotton  cloth  as  one  hundred  men 
could  manufacture  before,  and  the  consequence  is,  that 
cotton  cloth  is  sold  at  twenty-five  cents  per  yard.  It  is 
evident,  that  if  the  demand  be  precisely  doubled,  there 
will  be  wanted  just  as  many  laborers  as  before  ;  so  that 
their  condition  will  be  in  no  manner  altered,  except  by 
change  of  labor  with  its  correspondent  advantages,  and 
the  gradual  rise  of  wages,  spoken  of  above.  And,  it 
is  also  evident,  that  every  degree  of  increase  of  demand, 
beyond  what  is  sufficient  to  produce  this  equilibrium 
must  be  for  the  benefit  of  those  engaged  in  this  sort  of 
labor. 

But  it  is  evident   for  several  reasons,  that  the  reduc- 


EFFECTS    OF    INCUEASED     PRODUCTIVENESS.    iGl 

tion  of  price  one  half,  must  more  than  double  the  de- 
mand for  cotton  cloth.  Thus,  when  the  price  was  fifty 
cents  per  yard,  only  those'  consumers  who  were  wortli 
one  thousand  dollars  per  year,  could  purchase  cotton 
cloth ;  and  the  sale  was,  of  course,  limited  to  them. 
But  now  that  it  is  at  twenty-five  cents,  the  class  worth 
only  five  hundred  dollars  per  year  is  just  as  able  to  pur- 
chase it,  as  those  worth  one  thousand  were  formerly. 
Now,  if  this  class  were  only  of  the  same  number  as  that 
worth  one  thousand,  the  demand  would  be  doubled,  and, 
of  course,  the  laborer  would  suffer  no  injury.  But  the 
fact  is,  that  the  class  worth  five  hundred  dollars,  is  three 
or  four  times  as  large  as  tiiat  worth  one  thousand. 
Hence,  by  all  this  difference,  the  laborer  is  the  gainer, 
and  a  larger  number  of  laborers  is  required.  But  this  is 
not  all.  There  are  various  classes,  between  those  worth 
one  thousand  dollars  and  those  worth  five  hundred  dol- 
lars, who  are  now  able  to  purchase  the  article,  as,  those 
of  nine  hundred,  eight  hundred,  seven  hundred,  and  six 
hundred,  each  one  of  them  being  larger  than  the  class 
of  first  purchasers.  All  these  unite  to  uicrease  the  de- 
mand for  this  kind  of  labor.  And  again  :  The  class 
worth  one  thousand  dollars  will  now  use  a  much  largei 
amount  of  cotton  cloth  than  formerly  ;  and  cotton  cloth 
will  now  be  used  for  purposes  to  which  it  could  never 
before  have  been  appropriated,  and  it  will  supersede  the 
use  of  many  articles,  with  which  it  could  never  before 
have  eome  into  competition.  All  this  is  to  be  added  to 
the  benefits  conferred,  by  the  rntroduction  of  machinery, 
or  by  increasing  the  productiveness  of  labor,  upon  the 
laborers  in  this  particular  department.  Every  one  must 
see  that  this  benefit,  thus  resulting  from  increase  of  de- 
mand, which  is  the  thing  now  under  consideration,  is  ab- 
solutely incalculable. 

It  may  be  said,  that  this  is  an  exaggerated  case.  I 
answer  :  The  case  is  not  given  for  the  sake  of  accuracy 
ill  numbers,  but  for  the  sake  of  illustrating  a  manifest 
tendency.  And,  that,  in  this  respect  it  is  accurate,  the 
whole  history  of  manufactures  bears  amj)le  testimony, 
('ompare  those  states  of  society  iii  which  machinery  is. 
9* 


J02    EFFECTS    OF     INCREASED     PRODUCTIVENESS. 

not  used,  with  those  in  which  it  is  used,  and  inquire  Jii 
which  of  them  the  wages  of  the  laborer  are  liigiier,  and 
in  which  his  habitation  displays  the  greater  number  of 
comforts,  and  in  which  his  shelf  is  covered  with  the 
greater  number  of  books.  Examine  the  statistics  of 
a  particular  branch  of  manufacture,  and  inquire  in  what 
period  there  has  been,  in  proportion  to  the  whole 
population,  the  greatest  number  of  laborers  required  in 
that  particular  manufacture.  Has  this  demand  for  this 
particular  kind  of  labor  been  greater  in  the  period  when 
natural  agents  and  machinery  have  been  used,  or  in  that 
in  which  they  have  not  been  used  .'*  The  answer  to 
these  questions  is  given  in  the  history  of  the  progress  of 
the  cotton  manufacture,  the  manufacture  of  books,  of 
nails,  of  pins,  and  every  other  article  of  common  use  : 
and  such  articles  alone  are  of  any  consequence  in  such 
an  estimate.  This  shows  that  the  above  illustration  is 
true^  so  far  as  it  teaches  the  tendency,  which  is  all  that  is 
necessary  in  the  present  case. 

But  this  is  not  all.  Suppose  the  demand  for  cotton 
cloth  to  be  doubled,  there  must  be  twice  the  amount  of 
cotton  produced  ;  twice  as  many  vessels  built,  to  trans- 
port it ;  twice  as  many  men  to  navigate  them  ;  besides 
the  number  of  men  required  to  construct  the  machinery' 
necessary  to  fabricate  it.  Suppose  the  number  of  books 
to  be  doubled  ;  there  must  be  tw  ice  as  much  paper  made, 
twice  as  many  rags  purchased,  twice  as  many  types 
made,  and  twice  as  much  transportation  required  for  the 
supply  of  the  market.  All  this  must  add  to  the  demand 
for  labor,  and  must  tend,  by  just  so  much,  to  increase 
the  wages  of  the  operative.  And  hence,  if  these  con- 
siderations be  compared,  it  will  be  seen  : 

1.  That  the  introduction  of  machinery  reduces  tliu 
price  of  articles  of  consumption  ;  that  is,  renders  the 
wages,  whatever  they  may  be,  of  the  operative,  of 
more  value. 

2.  That,  by  the  more  rapid  multiplication  of  capital, 
it  produces  a  greater  demand  for  labor  in  general,  that 
is,  it  makes  the  wages  of  all  labor  greater  ;  and 

3.  That  its  tendency  is  to  create  an  increased  demand 


EFFECTS  OF  INCREASED  PRODUCTIVENESS.  103 

for  laboi  ;  that  is,  to  produce  a  rise  of  wages  in  that  rfc- 
parlment  of  industry^  into  vvhicii  natural  agents  are 
specially  introduced  ;  and  it  does  this  according  to  the 
degree  in  which  they  are  introduced.  That  is,  in  gen- 
eral, the  introduction  of  machinery  renders  the  wages  of 
the  laborer  more  valuable  ;  it  raises  the  wages  of  labor 
in  general,  and  raises  the  wages  of  labor  specially,  in 
that  department  in  which  natural  agents  are  employ eil. 
What  any  man  can  reasonably  ask  for,  more  than  this,. 
I  do  not  distinctly  perceive. 

11.  The  effects  of  increased  productiveness  upon 
consumers  may  be  easily  explained,  on  the  principles  al- 
ready illustrated.  I  need  not,  therefore,  enlarge  upon  this 
subject,  as  it  has  already  been  so  frequently  alluded  to. 

1.  By  increased  productiveness,  every  consumer  is 
richer  ;  that  is,  he  is  able,  by  the  same  amount  of  labor, 
to  procure  a  greater  amount  of  the  objects  of  desire. 
This  is  evidently  the  same  thing  to  him,  as  though  his 
income  were  increased.  If  I  am  able,  this  year,  with 
two  hundred  dollars,  to  purchase  as  much  as  I  could 
purchase  last  year  for  four  hundred  dollars,  and  I  can 
earn  two  hundred  dollars,  as  easily  as  before,  it  is  pre- 
cisely the  same  thing,  as  if,  at  the  former  prices,  my 
wages  had  risen  from  two  hundred  to  four  hundred 
dollars. 

2.  Production  is  more  perfect.  This  has  already 
been  illustrated,  as  one  of  die  effects  of  the  use  of  ma- 
chinery ;  that  is,  the  consumer  not  only  obtains  more  of 
the  same  article  for  the  same  sum  of  money,  but  he  also 
obtains  a  better  article.  Every  one  must  have  observed, 
that  calicoes,  crockery,  and  many  other  articles  of  ordi- 
nary consumption,  are  not  only  much  cheaper,  but  also 
much  more  beautiful,  than  they  were  a  few  years  since. 

3.  A  vast  number  of  articles  is  thus  added  to  the 
means  of  happiness  of  the  human  race,  oi  which,  other, 
wise,  they  must,  from  necessity,  have  been  deprived- 
All  that  we  possess,  above  the  comforts  of  the  naked 
savage,  is  the  result  of  the  use  of  natural  agents,  and  of 
division  of  labor  ;  that  is,  of  the  increased  productive- 
ness of  human  lal  or. 


104    EFFECTS    OP    INCREASED     PRODUCTIVENESS. 

4.  Nor  is  this  all.  While  all  the  labor  of  man  u 
necessary  to  support  mere  physical  existence,  there  can 
be  no  opportunity  for  intellectual  cultivation.  As  soon, 
however,  as  he  arrives  at  that  condition  of  productive 
ness  of  labor,  in  which  he  is  able  to  provide  for  his  phys- 
ical wants,  with  less  than  all  his  time  and  effort,  oppor- 
tunity is  afforded  for  intellectual  development.  At  this 
point,  commences  the  dawn  of  intellectual  improvement. 
As  increased  productiveness  affords  more  abundant  lei- 
sure, improvement  advances.  As  soon  again,  as,  by 
improved  intellectual  power,  man  begins  to  discover  and 
apply  the  laws  of  nature,  a  vast  accession  is  made  to  the 
power  of  human  productiveness.  Henceforth,  thesf; 
two  forces  conspire  to  assist  each  other.  Increased  pro- 
ductiveness allows  of  increased  time  for  investigation, 
discovery,  and  invention  ;  and  discovery  and  invention 
increase  the  power  of  productiveness.  The  more  ac- 
tively these  act  and  re-act  upon  each  other,  the  more 
rapid  is  the  progress  of  society,  and  the  more  rapidly 
accelerated  is  the  movement  of  civilization. 

If  this  be  so,  we  see  how  puerile  is  the  prejudice 
which  frequently  exists  against  the  use  of  labor-saving 
machinery  since  the  introduction  of  such  machinery, 
more  than  any  thing  else,  tends  permanently  to  improve 
the  condition  of  the  laborer.  We  see,  also,  how 
groundless  is  the  opinion,  that  education  and  science  are 
without  practical  benefit,  and  that  philosophers  and  stu- 
dents are  merely  a  useless  burden  upon  the  commu- 
nity ;  since  it  is  knoicledge  which  has  given  to  us  all  the 
advantages  which  we  possess  over  savages,  and  it  is  the 
application  of  that  knowledge,  which  furnishes  employ- 
ment for  nine  tenths  of  the  whole  community.  We  see, 
also,  how  short-sighted  is  that  national  selfishness,  which 
desires  to  limit  and  restrict  the  intercourse  between  na- 
tions ;  since  it  is  for  the  interest  of  each  nation  to  im- 
prove, to  the  utmost,  its  own  advantages,  and  to  pro- 
r.ure,  by  exchange  with  other  nations,  those  production? 
for  the  creation  of  which  it  possesses,  by  nature,  inferior 
facilities. 


CHAPTER  THIRD. 

OP    THE    LAWS    WHICH    GOVERN  THE    APPLICATION   OV 

LABOR    TO    CAPITAL. 

We  have  thus  far,  considered  capital  and  ]abor,  sep- 
arately, and  have  endeavored  to  analyze  the  nature  and 
functions  of  each.  It  is  manifest,  however,  that  we 
have  not  yet  exhausted  the  subject.  In  many  countries, 
a  vast  amount  of  capital  and  of  labor  has  never  yet  been 
employed.  In  other  countries,  capital  and  labor  have 
been  united  at  different  periods,  with  difl'erent  degrees 
of  success.  Hence,  while  some  nations  have  rapidly 
accumulated  wealth,  the  wealth  of  others  has  remained, 
for  ages,  stationary  ;  and  in  others,  it  has  diminished. 
The  most  fertile  soils  of  Europe  and  Asia,  once  the 
garden  of  the  world,  now  under  the  despotism  of  Tur- 
key, scarcely  maintain  their  sparsely  settled  inhabitants- 
It  remains  for  us,  therefore,  to  proceed  with  our  inves- 
tigation, in  order,  if  possible,  to  ascertain  the  laws  which 
influence  the  application  of  labor  to  capital. 


SECTION  I. 

THE     CONDITIONS     OF     OUR     BEING,     ON     WHICH     THE 
LAWS  ON  THIS    SUBJECT  ARE  FOUNDED. 

In  order  to  arrive  at  the  truth  with  the  greater  cer- 
tainty, it  will  be  proper  to  consider   the  circumstances 
under  which  man  is  placed,  with  reference  to   the  uni 
verse  around  him,  so  far  as  this  subject  is  considered. 

1.  God  has  created  man  with  physical  and  intellectu 
al  faculties,  adapted  to  labor.      He  has  given  us  a  mind, 
adapted  to  investigate    the  laws  of  the  universe,  and  a 
body  adapted  to  perform  all  those  operations  by  which, 


106  co^J^TlONs   of  production.  ' 

in  obedience  to  those  laws,  the  objects  of  desire  may 
be  produced. 

2.  Labor  has  been  made  necessary  to  the  attainment 
of  the  means  of  happiness.  No  valuable  object  of  de- 
sire can  be  procured  without  it.  Intellectual  pow(.'r 
cannot  be  attained  without  intellectual  discipline  ;  nor  a 
krowledge  of  the  laws  of  nature,  without  study.  Nei- 
ther physical  comforts,  nor  even  physical  necessaries, 
can  be  obtained,  unless  labor  be  first  expended  to  pro- 
cure them.  The  universal  law  of  our  existence  is,  "  In 
the  sweat  of  thy  face  shalt  thou  eat  thy  bread." 

3.  Labor  is  necessary  to  the  healthful  condition  of 
our  powers,  both  physical  and  intellectual.  Without 
intellectual  labor,  the  mind  becomes  enfeebled ;  and, 
were  this  labor  wholly  intermitted,  it  would  sink  into 
idiocy  or  madness.  Williout  physical  labor,  the  body, 
feeble  and  enervated,  becomes  a  prey  to  pain  and  dis- 
ease. 

4.  Thai  labor,  per  se,  is  pleasant,  it  is  not  necessa- 
ry to  assert.  It  is  sufficient  to  our  purpose,  that  it  is 
less  painful  than  idleness  and  the  results  of  idleness. 
The  laborer  complains  of  his  toil,  but  deprive  him  of 
his  opportunity  for  toil,  and  he  becomes  miserable. 
When  men  are,  in  our  penitentiaries,  condemned  to 
solitary  confinement,  and  labor  or  idleness  are  left  pure- 
ly to  their  own  choice,  they  have  never  been  known  to 
continue  longer  than  a  few  days,  without  beseeching, 
importunately,  for  work.     The    veterans  who  are  sup- 

' ported  at  Greenwich  Hospital,  England,  at  the  publi3 
expense,  wholly  without  labor,  are  said  to  be,  in  gen- 
eral, very  unhappy.  The  uncontrollable  desire  of  chil- 
dren for  some  sort  of  employment,  illustrates  the  same 
truth.  Those  persons  who  consider  labor  as  degrading, 
obey  the  same  law  of  our  nature  in  another  form.  The 
gymnastic  exercises  of  the  Greeks  and  Romans,  and 
the  hunting,  riding,  shooting,  and  travelling  of  the  mod- 
erns, are  nothing  more  than  expensive  modes  of  exer- 
cise or  labor.  The  poor  man  exercises  himself,  the 
rich  man  employs  a  horse  to  exercise  him.  The  one 
does  expensively  and    unproductively,   what  the   other 


CONDITIONS     OF     PRODUCTION.  107 

does  without  expense  and  productively.  Both  equally 
yield  obedience  to  the  law  of  our  creation  ;  and,  in 
what  manner  soever  it  is  obeyed,  both  reap  advantages, 
-from  the  mere  fact  of  obeying  it. 

5.  On  the  contrary,  the  Creatpr  has  affixed  several 
penalties,  which  those  who  disobey  this  law  of  their  be- 
ing, can  never  expect  to  escape.  He  who  refuses  to 
labor  with  his  mind,  suffers  the  penalty  of  ignorance. 
The  amount  of  this  penalty  may  be  estimated,  by  con- 
sidering the  blessings,  both  physical  and  intellectual,  of 
which  ignorance  deprives  us  ;  and  by  contrasting  the 
comforts  of  savage  with  those  of  civilized  nations,  where 
the  physical  effort,  made  by  both,  is  the  same.  He 
who  refuses  to  labor  with  his  hands,  suffers,  besides  the 
ppms  of  disease,  all  the  evils  of  poverty,  cold,  hunger, 
and  nakedness.  The  results  which  our  Creator  has  at- 
tached to  idleness,  are  all  to  be  considered  as  punish- 
ments, which  he  inflicts  for  the  neglect  of  this  establish- 
ed law  of  our  being. 

G.  And,  on  the  other  hand,  God  has  assigned  to  in- 
dustry, rich  and  abundant  rewards.  "  The  hand  of  the 
diligent  maketh  rich."  "  Seest  thou  a  man  diligent  in 
his  business,  he  shall  stand  before  kings  ;  he  shall  not 
stand  before  mean  men."  The  pleasure,  the  indepen- 
dence, and  the  power  arising  from  knowledge,  are  the 
rewards  of  intellectual  industry.  "  A  wise  man  is 
strori'^^  yea,  a  man  of  understanding  increaselh  strength.'''' 
And  it  is  only  by  physical  labor,  that  the  riches  of  the 
earth  are  appropriated,  and  the  laws  of  nature  made  avail- 
able to  the  happiness  of  man.  At  the  first  there  existed 
nothing  in  our  world  but  the  earth,  with  its  spontaneous 
productions,  and  capabilities,  and  helpless  and  lefencc- 
less  man.  All  that  now  exists  of  capital,  of  conven- 
ience, of  comfort,  and  of  intelligence,  is  the  work  of 
industry,  and  is  the  reward  which  God  has  bestrwed 
upon  us  for  obedience  to  the  law  of  our  being. 

7.  If  such  be  the  facts  ;  if  God  have  given  to  all  men 
faculiies  for  labor  ;  if  he  have  made  labor  necessary  ut 
our  happiness  ;  if  he  have  attached  the  severest  penal- 
ties to  idleness,  and  have  proffered  the   richest  rewards 


108  FREEDOM    OF    LABOR    AND   CAPITAL. 

to  industry  ;  it  would  seem  reasonable  to  conclude,  that 
all  that  was  required  of  us,  was,  so  to  construct  the  ar- 
rangements of  society,  as  to  give  free  scope  to  the  laws 
of  Divine  Providence.  If  he  have  excited  us  to  labor 
by  sufficient  rewards,, and  deterred  us  from  indolence  by 
sufficient  penalties,  it  would  seem  that  our  business  must 
be,  to  give  to  these  rewards  and  penalties  their  free  an<l 
their  intended  operation.  These,  at  any  rate,  should  be 
the  means  first  tried,  in  order  to  facilitate  production  ; 
nor  should  any  others  be  resorted  to,  until  these  have 
been  tried  and  found  ineffectual. 

The  effects  of  this  constitution,  under  which  we  are 
placed,  will,  1  think,  be  fully  exerted,  in  proportion  as 
the  following  conditions  are  observed  : 

1 .  As  every  man  is  permitted  to  enjoy,  in  the  mqst 
unlimited  manner,  the  advantages  ot  labor. 

2.  As  every  man.  suffers  the  consequences  of  idleness. 
And,  these  being  equal, 

3.  Labor  will  be  applied  to  capital,  according  to  the 
ratio  which  subsists  between  the  whole  amount  of  capi- 
tal and  the  whole  number  of  laborers  ;  that  is,  the  great- 
er the  ratio  of  capital  to  the  number  of  laborers,  the 
more  active  will  be  their  industry,  and  vice  versa.    And, 

4.  Labor  will  be  applied  to  capital,  in  proportion  to 
the  knowledge  which  men  possess  of  the  advantages 
which  they  shall  obtain  by  labor  ;  that  is,  the  greater  the 
intelligence,  the  greater  the  industry.  To  these  several 
topics,  the  four  following  sections  of  this  chapter  will  be 
devoted. 


SECTION  IL 

INDUSTRY  WILL  BE  APPLIED  TO  CAPITAL,  AS  EVERT 
MAN  ENJOYS  THE  ADVANTAGES  OF  HIS  LABOR  AND 
HIS  CAPITAL. 

Although  God  has  designed  men  to  labor,  yet  he  has 
not  designed  them  to  labor  without  reward.  Hence, 
when  men  devise  some  form  of  labor,  even  for  exercise, 


DIVISION     3F    PROPERTY.  109 

they  always  connect  with  it  some  result,  as  the  game  of 
the  huntsman,  or  the  watering  place  of  tiie  traveller  or 
tourist.  Thus,  also,  as  it  is  unnatural  to  labor  without 
receiving  benefit  from  labor,  men  will  not  labor  continu- 
ously nor  productively,  unless  they  receive  such  bene- 
fit. And,  hence,  the  greater  this  benefit,  the  more 
active  and  spontaneous  will  be  their  exertion.' 

In  order  that  every  man  may  enjoy,  in  the  greatest 
degree,  the  advantages  of  his  labor,  it  is  necessary, 
provided  always  he  do  not  violate  the  rights  of  his  neigh- 
bor, 1st,  That  he  be  allowed  to  gain  all  that  he  can  ; 
and,  2d.  T/ia/,  having  gained  all  that  he  can,  he  be  al- 
lowed to  use  it  as  he  icill. 

I.  It  is  necessary  that  every  man  be  allowed  to  gain 
all  that  he  can  ;  that  is,  that  the  arrangements  of  socie- 
ty be  so  constructed,  that  every  man  be  able  to  render 
his  labor,  in  the  highest  degree,  available  to  himself. 
This  will  require, 

I .  That  property  be  divided.  When  property  is 
held  in  common,  every  individual  of  the  society  to  which 
it  belongs,  has  an  equal,  but  an  undivided  and  indeter- 
mined  right  to  his  portion  of  the  revenue.  Hence, 
every  one  is  at  liberty  to  take  what  he  will,  and  as  much 
as  he  will,  and  to  labor  as  much  or  as  little  as  he 
pleases.  There  is,  therefore,  under  such  an  arrange- 
ment, no  connexion  between  labor  and  the  rewards  of 
labor.  There  is  rather  a  premium  for  indolence  than 
for  industry.  In  such  a  case,  there  will  be  no  regular 
labor,  if  indeed  there  be  any  labor  at  all  ;  and,  what  is 
still  worse,  even  the  scanty  and  spontaneous  produc- 
tions of  the  earth  will  frequently  be  gathered  before 
they  are  ripe,  since  every  one  fears,  that,  if  he  do 
not  seize  them  now,  he  will  never  enjoy  them  at  all 
The  forest  of  an  Indian  tribe  is  held  in  common,  and  a 
few  hundred  families  barely  subsist  upon  a  territory 
which,  were  it  divided  and  tilled,  would  support  a  mil- 
lion of  civilized  men.  The  little  that  it  produces  to 
him.  is  the  result  of  division  of  property.  His  bow 
and  arrows,  his  wigwam,  and  his  clothing  are  acknowl- 
eilged  to  be,  in  the  .fullest  sense,  his  own.  Were  these 
10 


110  DIVISION     OF     PROPERTY 

to  be  held,  like  his  land,  in  common,  the  whole  race 
would  very  soon  perish,  from  want  of  the  necessaries  of 
life. 

On  the  contrary,  as  soon  as  land  with  all  other  prop- 
erty is  divided,  a  motive  exists  for  regular  and  voluntary 
labor,  inasmuch  as  the  individual  knows  that  he,  and  not 
his  indolent  neighbor,  will  reap  the  fruit  of  his  toil. 
Henceforth  he  begins  to  create  a  regular  supply  of  an- 
nual product.  With  increased  skill,  this  annual  product 
increases,  and  he  begins  to  convert  it  into  fixed  capi- 
tal, a  form  of  wealth  which  could  scarcely  exist  without 
division  of  property.  P^very  accession  to  his  fixed  cap- 
ital renders  his  labor  more  productive,  and  hence  it  cre- 
ates a  stronger  stimulus  to  increased  exer'ion.  With 
increased  exertion,  his  annual  capital  is  increased,  and  a 
greater  surplus  remains  to  be  changed  into  fixed  capital. 
Thus,  increased  production  stimulates  industry,  and  in- 
creased industry  results  in  more  abundant  production. 
Thus,  division  of  property,  or  the  appropriation,  to  each, 
of  his  particular  portion  of  that  which  God  has  given  to 
all,  lays  at  the  foundation  of  all  accumulation  of  wealth, 
and  of  all  progress  in  civilization. 

It  is  for  this  reason  that  property  held  in  common,  is 
so  generally  prejudicial  to  the  best  interests  of  a  socie- 
ty. A  common,  where  every  one,  at  will,  may  pasture 
his  cattle,  and  a  forest,  from  which  every  inhabitant  may 
procure  his  fuel,  are  encouragements  to  indolence,  and 
serve  to  keep  a  community  poor.  Thus,  also,  funds 
left  at  large  for  the  support  of  the  poor,  on  which  every 
one  is  supposed  to  have  an  equal  right  to  draw,  have 
gfnerally  been  found  to  foster  indolence.  Poor  laws, 
in  so  far  as  they  are  to  be  considered  a  fund  for  this  pur- 
pose, have  the  same  sort  of  injurious  tendency. 

2.  But  the  division  of  property  would  be  of  no  avail 
unless  the  right  of  property  were  enforced  ;  that  is,  un- 
less every  one  be  protected  in  the  undisturbed  possession 
of  whatever  he  has  rightfully  acquired.  As  no  one  will 
labor,  unless  he  knows  that  he  shall  reap  the  fruit  of  his 
toil,  so  no  one  will  take  the  pains  to  reap  the  fruit  of  his 
tcil.  unless  he  also  know  that  he  will  be  able  to  hold  it,  and 


THE     RIGHT     OF     PROPERTY.  Ill 

appro|)iiate  it  to  the  purposes  of  his  own  gratification. 
And,  hence,  we  see  that  human  labor  is  exerted  in  dif- 
ferent countries,  very  much  in  proportion  as  the  right  of 
property  is  both  understood  and  enforced. 

The  right  of  property  may  be  violated  by  the  tndt- 
vidual  or  by  society.  It  is  violated  by  the  individual, 
by  cheating,  stealing,  robbery,  and  violation  of  con- 
tracts. And,  universally,  just  as  these  crimes  prevail, 
production  languishes,  industry  diminishes,  and  the  rich- 
est soil  fails  to  support  its  few  and  impoverished  inhabi- 
tants. Such  was  the  case  in  Europe,  during  the  era  of 
feudal  oppression.  TiTere  was  then  no  encouragement 
to  labor,  because  no  one  knew  whether  he,  or  a  baronial 
tyrant,  would  reap  the  fruit  of  his  industry. 

Hence,  we  see  the  economical  importance  of  all 
means  which  shall  prevent  the  individual  violation  of  the 
ri^  of  property.     These  means  are  two. 

The  first  is,  the  inculcation  of  those  moral  and  reli- 
gious principles,  which  teach  men  to  respect  the  rights  of 
others  as  their  own,  that  is,  to  obey  the  law  of  reciproci- 
ty ;  and  which  present  the  strongest  conceivable  reas- 
ons for  so  doing.  This  ij  the  most  certain  method  of 
preventing  the  violation  of  the  right  of  property,  inas- 
much as  it  aims  to  eradicate  those  dispositions  of  mind, 
from  which  all  violation  proceeds.  It  is  also  the  cheap 
est,  as  it  aims  at  prevention,  which  is  always  more  econ 
omical  than  cure.  It  is  also  necessary,  inasmuch  as 
good  laws  will  never  be  enacted,  or  if  enacted,  w  ill  nev- 
er be  obeyed,  only  in  so  far  as  there  exists  a  moral  char- 
acter in  the  community  sufficiently  pure  to  sustain  them. 
In  proportion  as  these  are  efficacious,  all  other  means 
are  needless.  Hence,  we  see  the  reason  why  moral 
and  religious  nations  grow  wealthy  so  much  more  rapidly 
than  vicious  and  irreligious  nations.  The  feeling  of  per- 
fect tranquillity  and  security,  which  a  high  social  morali- 
ty diffuses  over  a  whole  community,  is  one  of  the  most 
beneficial,  as  well  as  one  of  the  strongest  stimulants  to 
universal  industry.  This  is  one  of  the  temporal  rewards 
which  God  bestows  upon  social  virtue.  And,  inasmuch 
as  no  one  can  enjoy  this  reward,  simply  by  being  virtu- 


112  THE    RIGHT    OF     PROPERTT. 

ous  himself,  but  only  as  his  fellow  citizens  also  are  virtu 
ous,  we  see  the  indication  in  our  constitution,  that  it  is  the 
duty,  as  well  as  the  interest,  of  every  man,  to  labor  to 
render  other  men  more  virtuous. 

3.  But  inasmuch  as  all  men  are  not  influenced  in  their 
conduct  by  moral  and  religious  principles,  it  is  necessary 
that  aggression  be  somehow  prevented,  and  violations  of 
property,  in  so  far  as  possible,  redressed.  Hence,  the 
importance  of  wholesome  and  equitable  laws,  of  an  in- 
dependent and  firm  judiciary,  and  an  executive,  which 
shall  carry  the  decisions  of  law  faithfully  into  effect. 
Hence  the  expense,  necessary  fbr  the  most  perfect  ad- 
ministration of  justice,  is  among  the  most  productive  of 
all  the  expenditures  of  society.  Good  law,  and  the 
faithful  administration  of  it,  are  always  the  cheapest  law, 
and  the  cheapest  administration  of  it.  The  interests  of 
man  require  that  law  should  be  invariably  executed, ^nd 
that  its  sovereignty  should,  under  all  circumstances,  be 
inviolably  maintained. 

But  the  right  of  property  may  be  violated  by  society. 
It  sometimes  happens,  that  society,  or  government, 
which  is  its  agent,  though  it  may  prevent  the  infliction  of 
wrong  by  individuals  upon  each  other,  is  by  no  means 
averse  to  inflicting  wrong  or  violating  the  right  of  indi- 
viduals itself.  This  is  done,  where  governments  seize 
upon  the  property  of  individuals  by  mere  arbitrary  act, 
a  form  of  tyranny,  with  which  all  the  nations  of  Europe 
were,  of  old,  too  well  acquainted.  It  is  also  done,  by 
unjust  legislation  ;  that  is,  when  legislators,  how  well  so- 
ever chosen,  enact  unjust  laws,  by  which  the  property 
of  a  part,  or  of  the  whole,  is  unjustly  taken  away,  or 
what  is  the  same  thing  subjected  to  oppressive  taxation. 

Of  all  the  destructive  agencies  which  can  be  brought 
to  bear  upon  production,  by  far  the  most  fatal,  is  public 
oppression.  It  dnnks  up  the  spirit  of  a  people,  by  in- 
flicting wrong  through  means  of  an  agency  which  was 
created  for  the  sole  purpose  of  preventing  wrong  ;  and 
which  was  intended  to  be  the  ultimate  and  faithful  refuge 
of  the  friendless.  When  the  antidote  to  evil,  becomes 
».he  source  ot  evil,  what  hope  for  man  is  left  ?     When 


FREEDOM    aF.  INDUSTRY    AND    CAPITAL.  113 

society  itself  sets  the  example  of  peculation,  what  shall 
prevent  the  individaals  of  the  society  from  imitating  that 
example  ?  Hence,  public  injustice  is  always  the  prolific 
parent  of  private  violence.  The  result  is,  that  capita, 
emigrates,  production  ceases,  and  a  nation  either  sinks 
down  in  hopeless  despondence  ;  or  else  the  people, 
harassed  beyond  endurance,  and  believing  that  their  condi- 
tion cannot  be  made  worse  by  any  change,  rush  into  all  tlie 
horrors  of  civil  war  ;  the  social  elements  are  dissolved  ; 
the/  sword  enters  every  house  ;  the  holiest  ties  which 
bind  men  together  are  severed  ;  and  no  prophet  can 
predict,  at  the  beginning,  what  will  be  the  end. 

Hence  we  see  the  importance  to  the  industry  of  a 
country,  of  a  constitution  which  guarantees,  to  the  indi- 
vidual, immunity  not  only  from  private,  but  also  from 
public  oppression.  Wherever  this  immunity  is  wanting, 
the  progress  of  a  nation  in  wealth  will  be  slow.  It  is 
owing  rather  to  the  freedom  of  her  institutions  and  the 
equity  of  her  laws,  than  to  her  physical  advantages,  that 
Great  Britain  has  so  far  outstripped  all  other  European 
nations  in  the  accumulation  of  wealth,  and  in  every 
thing  that  confers  social  power.  It  is  almost  superflu- 
ous, however,  to  add,  that  a  free  constitution  is  of  no 
value,  unless  th«  moral  and  intellectual  character  of  a 
people  be  sufficiently  elevated  to  avail  itself  of  the  ad- 
vantages which  it  offers.  It  is  merely  an  instrument  of 
good,  which  will  accomplish  nothing,  unless  there  exi&l 
the  moral  disposition  to  use  it  aright. 

To  sum  up  what  has  been  said  :  Labor  will  be  ap- 
plied to  capital,  in  proportion  as  every  man  is  allowed 
to  gain  all  that  he  can  ;  that  is,  as  property  is  most  pci"- 
fectly  divided  ;  and  as  this  division  is  most  strictly  en- 
forced ;  that  is,  as  the  right  of  property  is  guarded  by 
ihe-tnost  equitable  laws  ;  and  as  there  exist  the  strong- 
est guarantees  that  these  laws  will  be  inviolate,  whelhei 
they  relate  to  individuals  or  to  society. 

II.  1  he  second  j)art  of  the  condition  mentioned  in 
the  beginning  of  this  section  is,  that  the  individual  be 
allowed  to  use  his  own  as  he  will.  To  this,  is  of  course 
10» 


I  14  FREEDOM    OF    IKDUSTRY    AND    CAPITAL. 

lo  be  added  the  condition,  that  he  use  it  in  sucd  niajiner, 
!is  not  to  interfere  with  the  rights  of  his  neighbor. 

A  man's  possessions  are  his  talents,  facukies,  skill, 
and  the  wealth  and  reputation  which  these  have  enabled 
him  to  acquire  ;  in  other  words,  his  industry  and  his 
capital.  In  order  that  industry  be  applied  to  capital 
with  the  greatest  energy,  it  is  necessary  that  every  man 
be  at  liberty  to  use  them  both  as  he  will ;  that  is,  that 
loth  of  them  be  free. 

And  first,  of  industry.  The  aptitudes  of  men  for 
different  employments  are  very  dissimilar.  The  choice 
of  every  man  naturally  leads  him  to  that  employment  for 
which  he  is  best  adapted.  By  allowing  every  man, 
therefore,  to  employ  his  industry  as  he  choose«-,  every 
man  will  be  employed  about  that  for  which  he  is  best 
adapted  ;  and  hence,  the  production  of  all  will  be  great- 
ly mcreased,  because  we  thus  avail  ourselves  of  the  pe 
culiar  productiveness  of  every  individual.  Nor  is  this 
all.  By  allowing  evc*y  man  to  labor  as  he  chooses,  we 
very  greatly  increase  the  happiness  of  every  individual. 
And  every  one  knows  that  a  man  will  labor  with  better 
success  when  his  labor  is  pleasant,  than  when  i^  is  irk- 
some. 

The  case  is  the  same  with  respect  to  capital.  Every 
man  is  more  interested  in  his  own  success,  than  any 
other  man  can  be  interested  in  it.  Hence,  every  man  is 
likely  to  ascertain  more  accurately  in  what  manner  he 
can  best  employ  his  capital,  than  any  other  man  can  as- 
certain it  for  him.  If  every  man,  therefore,  be  allowed 
to  invest  his  capital  as  he  will,  the  whole  capital  of  a 
country  will  be  more  profitably  invested,  than  under  any 
other  circumstances  whatever.  And,  since,  when  he  is 
left  thus  at  liberty,  there  will  be  the  greatest  gain  to  the 
capitalist,  there  will  also  be  the  greatest  stimulus  to»his 
industry  ;  for  the  stimulus  to  labor  is  always  in  propor- 
tion to  the  rewards  of  labor.  And,  on  the  contrary,  in 
just  so  far  as,  by  anv  means,  this  productiveness  is  di- 
minished, the  stimulus  to  labor  is  also  diminished  with  it. 

It  may  be  said  that  inon,  if  left  to  themselves,  will  be 
liable  to  invest  their  capital  unwisely.     Granted.     Man 


FREEDOM     OF    INDUSTRY    AND    CAPITAL.  115 

IS  not  omniscient,  and  therefore  this  liability  cannot  be 
avoided.  The  question,  therefore,  is,  how  shall  il  be 
rendered  as  small  as  possible.  Will  a  man,  who  reaps 
the  benefit  of  success  and  suffers  the  evils  of  failure,  be 
less  likely  to  judge  correctly,  than  he  whose  faculties  are 
quickened  by  no  such  responsibility  ?  Nor  is  this  all. 
\ot  only  are  legislators,  who  generally  assume  the  labor 
of  directing  the  manner  in  which  labor  or  capital  shall 
be  employed,  in  no  manner  peculiarly  qualified  for  this 
task  ;  they  are,  in  many  respects,  peculiarly  disquahfied 
for  it.  The  individual  is  liable  to  no  peculiar  biases, 
in  making  up  his  mind  in  respect  to  the  profitableness  of 
an  investment.  If  he  err,  it  is  because  the  indications 
deceive  him.  The  legislator,  besides  being  liable  to  err 
by  mistaking  the  indications,  is  liable  to  be  misled  by 
party  zeal,  by  political  intrigue,  and  by  sectional  preju- 
dice. What  individual  would  succeed  in  his  business, 
if  he  allowed  himself  to  be  influenced  in  the  manner  of 
conducting  it,  by  such  considerations  .''  And  must  not 
like  causes  always  produce  like  results  ? 

Besides,  every  man  feels,  instinctively,  that  he  has  a 
right  to  use  his  capital  and  his  industry  as  he  pleases, 
provided  he  interfere  not  with  the  rights  of  another  ; 
and  that,  to  restrict  hira  in  this  use,  is  injustice.  We 
have  before  said,  that  nothing  paralyzes  industry  like  op- 
pression, and  it  is  as  true  in  this  case,  as  in  any  other. 
If  this  sort  of  interference  be  violent  or  frequently  re- 

teated,  capital  and  labor,  whose  motto,  like  that  of  Dr. 
'ranklin,  is,  "  Where  liberty  dwells,  there  is  my  coun- 
try," will  emigrate  to  some  more  congenial  social  atmo- 
sphere. And  if  the  interference  be  not  so  intolerable 
as  to  produce  these  results,  yet,  in  just  so  far  as  it  has 
any  (!ffect,  it  is  all  of  this  kind,  and,  by  its  whole  opera- 
tion, must  diminish  the  incitements  to  industry. 

And,  on  the  contrary,  just  in  proportion  as  every  in 
dividual  is  free  to  employ  his  industry  and  capital  as  ho 
rJMioscs,  and  thus  both  to  receive  a  larger  compensation 
for  his  labor,  and  also  to  laoor  more  happily,  will  be  the 
inducements  to  industry  and  to  tlie  investment  of  capital. 


116  FREEDOM    OF    INDUSTRf. 

If  this  be  so,  we  see  the  impolicy  of  several  forms  of 
legislative  interference,  in  relation  to  this  subject. 

1.  We  see  what  must  be  the  effects  of  monopolies. 
A  monopoly  is  an  exclusive  right  granted  to  a  man,  or 
to  a  company  of  men,  to  employ  their  .abor  or  capital 
in  some  particular  manner.  Suck  was  the  exclusive 
right  granted  to  the  East  India  Company,  to  import  into 
ihe  poits  of  Great  Britain,  or  her  territories,  the  produc- 
tions of  all  countries  east  of  the  Cape  of  Good  Hope. 
Such  were  the  privileges  granted  formerly  by  Spain,  to 
particular  individuals  or  companies,  of  importing  foreign 
commodities  into  the  ports  of  her  colonies  in  South 
America.  The  result  of  this  exclusion  was  to  prevent 
all  other  persons,  except  those  thus  favored,  from  in- 
vesting their  capital  in  this  manner  ;  and  hence,  to  re- 
duce the  value  of  that  capital,  by  precisely  the  amount 
of  this  effect.  Nor  is  this  all.  Those  who  hold  this 
exclusive  privilege,  being  liable  to  no  competition,  may 
."Jiarge  for  their  commodities  whatever  they  choose 
Here  is,  therefore,  a  two-fold  injustice ;  first,  the  means 
of  the  consumer  are  diminished  ;  and  secondly,  the 
price  which  he  must  pay,  is  enhanced  at  the  mere  will 
of  his  oppressor. 

2.  Hence  we  see  the  impolicy  of  obliging  an  indi- 
vidual, or  a  class  of  individuals,  to  engage  in  any  labor, 
or  to  make  any  investment,  contrary  to  their  wishes. 
Thus,  we  are  told  that  during  the  French  revolution, 
some  individuals  were  punished  capitally,  for  raising  cat- 
tle instead  of  wheat.  Men  may  call  this  legislation,  but 
the  true  name  for  it  is  robbery.  To  oblige  a  man  to 
raise  a  crop  worth  fifteen  dollars  per  acre,  when  he 
would  otherwise  have  raised  one  worth  twenty  doUai's 
per  acre,  is  just  the  same  thing  as  to  let  him  do  as  he 
pleases,  and  then  rob  him  of  five  dollars  an  acre  after- 
wards. The  wrong  is  the  more  intense,  in  the  former 
'ase,  inasmuch  as  it  is  done  under  the  semblance  of  jus- 
tice, and  by  men  who  claim,  as  the  robber  does  not, 
that  they  have  the  right  to  do  it.  Such  legislation  as 
this  H'ill,  in  any  country,  soon  produce  a  famine. 

3    Another  form  of  injury  under  this  class,  is  seen  in 


FREEDOM    OF    INDUSTRY.  117 

the  restrictions  upon  industry,  formerly,  if  not  now,  ex- 
isting in  many  of  the  countries  of  Europe.  By  these 
regulations,  artisans  were  prohibited  the  exercise  of 
more  than  one  trade ;  they  were  not  allowed  to  exercise 
that  trade,  unless  they  had  served  a  prescribed  appren- 
ticeship ;  nor  unless  they  joined  a  particular  trade-soci- 
ety, and  bound  themselves  to  comply  with  certain  restric- 
tions, as,  for  instance,  to  sell  at  particular  prices,  and 
never  to  employ  beyond  a  certain  number  of  appren- 
tices. The  result  of  all  this  oppression  is  most  inicpii- 
lous.  It  reduces  the  value  of  skill  and  industry,  the 
sole  estate  of  the  laborer  ;  and  places  him  in  the  power 
of  those  whose  interest  it  is  to  reduce  the  supply  as 
much  as  possible,  in  order  to  secure  to  themselves  the 
most  exorbitant  profit.  In  such  cases,  a  large  amount 
of  available  industry  must  be  kept  out  of  employment  ; 
and,  of  course,  production  is,  to  this  whole  amount,  di- 
minished. The  tyranny  of  trades-unions,  though  ema- 
nating from  the  people  instead  of  the  government,  pro- 
duces precisely  the  same  effect. 

4.  The  same  effect  is  partially  produced  by  any  mode 
of  legislation,  by  which,  in  consequence  of  favor  shown 
to  one  party,  which  of  course  another  party  must  pay 
for,  men  are  obliged  to  exchange  an  employment,  for 
which  they  have  peculiar  facilities,  for  another  which 
they  do  not  prefer,  and  for  which  they  have  not  the 
same  facilities.  The  manner  in  which  this  would  lessen 
the  stimulus  to  industry,  has  already  been  illustrated. 
Thus,  should  our  government,  believing  that  commerce 
was  more  valuable  to  this  country  than  manufactures, 
lay  a  tax,  sufficient  to  meet  the  expenses  of  the  govern 
ment,  upon  all  American  manufactures,  in  order  to  in- 
crease the  amount  of  foreign  ii  iportation,  this  would 
drive  manufacturers  out  of  business  and  oblige  them  to 
hecome  merchants  and  agriculturists.  I  think  that  every 
one  must  see  that  this  would  diminish  the  stimulus  to 
industry  throughout  the  whole  country.  Men  would  not 
voluntarily  engage  in  manufactures  in  preference  to  com- 
merce, unless  they  found  manufactures  to  be  more  profit- 
able ;  and  to  oblige  them  to  exchanpje  the  one  for  the 


il8  PREVENTION    OF    IDLENESS. 

Other,  IS,  therefore,  to  oblige  them  to  leave  a  moie  pro- 
ductive for  a  less  productive  mode  of  employment.  By 
all  this  difference  is  the  country  the  loser,  and  the  incite- 
ment to  industry  diminished. 

5.  Hence,  we  also  see  the  impolicy  of  laws  regulating 
consumption.  Such  are  sumptuary  laws  ;  or  those 
which  limit  the  degree  of  expensiveness  in  our  dress, 
clothing,  or  equipage.  These  were  formerly  common 
rn  Europe.  Such  also  are  laws  which  forbid  or  restrict 
the  expenditure  of  money  for  the  purposes  of  benevo- 
lence, religion,  or  any  thing  of  this  sort.  Every  one 
must  see  that  one  of  the  incitements  to  industry,  is  the 
pleasure  which  men  expect  to  derive  from  expenditure. 
Now,  if  this  expenditure  be  -  innocent,  it  matters  not 
what  sort  of  expenditure  it  is.  Society  has  nothing  to 
do  with  it ;  and  it  can  in  no  manner  interfere  with  it, 
without  doing  injustice,  and  taking  away  one  of  the 
strongest  inducements  to  industry. 


SECTION  III. 

LABOR  WILL  BE  APPLIED  TO  CAPITAL  IN  PROPOR- 
TION AS  EVERY  MAN  SUFFERS  THE  INCONVEN- 
IENCES   OF    IDLENESS. 

If  God  have  made  labor  necessary  to  our  well  being, 
in  our  present  state  ;  if  he  have  set  before  us  sufficient 
rewards  to  stimulate  us  to  labor  ;  and  if  he  have  attach- 
ed to  idleness  correspondent  punishments,  it  is  manifest 
tliat  tlie  intention  of  this  constitution  will  not  be  accom- 
plished, unless  both  of  these  classes  of  motives  are  al- 
lowed to  operate  upon  man.  We  shall,  therefore,  co- 
operate with  Him,  in  just  so  far  as  we  allow  his  designs 
to  take  effect  in  the  manner  he  intended. 

Now  this  result  will  be  accomplished, 

1.  By  the  division  of  property.  When  property  is 
perfectly   divided,   and  every  tiling  is  owned  by  some 


PREVENTION    OF    inLENESS.  Il9 

one,  and  every  one  knows  what  is  his  own,  nothing  is 
left  in  common.  Of  course,  no  man  can  then  obtain 
any  thing  more  than  he  now  possesses,  unless  he  obtain 
it  Dy  labor.  And  as  every  man  has  faculties  capable  of 
labor,  and  as  ihese  are  exclusively  his  own  ;  and  as 
every  one,  who  possesses  capital,  desires  to  employ  la- 
bor with  which  to  combine  it,  every  man  who  possesses 
his  natural  faculties,  has  the  means  by  which  he  may  ob- 
tain something  for  his  subsistence.  The  division  of 
property  is  thus  favorable  to  the  laborer  ;  inasmuch  as, 
in  consequence  of  it,  every  one  needs  his  labor,  and 
also  has  something  to  give  him  in  exchange  for  it. 

2.  But  suppose  property  to  be  universally  divided. 
A  man  may  possess  himself,  either  dishonestly  or  by 
begging,  of  the  property  for  which  he  has  not  labored. 
The  dishonest  acquisition  of  property,  as  by  cheating, 
stealing,  or  robbery,  will  be  prevented  by  the  strict  and 
impartial  administration  of  just  and  equitable  laws. 
Hence,  we  see  that  the  benefit  of  such  laws- is  two-fold. 
Tliey  encourage  industry,  first,  by  securing  to  the  indus- 
trious the  righteous  reward  of  their  labor  ;  and,  second- 
ly, by  inflicting  upon  the  indolent  the  just  punishment  of 
their  idleness  ;  or,  rather,  by  leaving  them  to  the  conse- 
quences which  God  has  attached  to  their  conduct.  Be- 
ing thus  thrown  upon  their  own  resources,  they  must 
obey  the  law  of  their  nature,  and  labor,  or  else  suffer 
the  penalty  and  starve. 

If  any  man  complain  that  this  is  a  hardship,  he  must 
mean  that  this  hardship  has  reference  to  our  relations 
either  to  man  or  to  God.  So  far  as  our  relations  to  man 
are  concerned,  there  can  certainly  be  no  hardship ;  for 
every  thing  that  we  see  is  the  result  of  labor,  and  U 
either  the  result  of  the  labor  of  him  that  holds  it,  or  of 
him  who  voluntarily  parted  with  it  for  an  equivalent  in 
labor.  Now,  as  every  thing  we  see  is  the  result  of  la- 
bor, the  question  is,  who  shall  enjoy  this  result  of  labor, 
he  who  has  labored,  or  he  who  has  not.  If  it  be  a 
hardship  for  a  man  not  to  enjoy  that  for  which  he  has 
not  labored  ;  it  would  certainly  be  a  much  greater  hard- 
Fhip  for  a  man  not  to  enjoy  that  for  which  he  has  la- 


IW  POOR    LAWS. 

bored.  So  that,  the  hardship  would  be  greater  If  tht 
system  were  arranged  to  suit  the  complainaut,  than  it  ih 
now,  under  the  system  of  which  he  complains. 

If  the  hardsiiip  turn  upon  our  relations  to  God  ;  that 
IS,  if  a  man  complain  because  God  made  him  to  labor, 
it  is  a  difficulty  which  the  complainant  must  settle  with 
his  Maker.  We  have  nothing  to  do  with  it.  But  since 
God  has  ordained  it,  we  ramiot  help  it,  and  an  indolent 
man  has  no  just  cause  of  grief  with  his  fellow  men,  if 
they  see  6t  to  act  according  to  it. 

II.  But  men  may  be  relieved  from  the  necessity  of 
labor,  by  charity.  It  will  be  understood  that  I  here 
speak  of  men  as  poor  from  indolence,  and  not  by  visita- 
tion of  God.  I  do  not  here  refer  to  the  sick,  the  infirm, 
the  aged,  the  helpless,  the  widow,  the  fatherless,  and 
the  orphan.  When  God  has  seen  fit  to  t^ke  away  the 
power  to  labor,  he  then  calls  upon  us  to  bestow  Hberally, 
and  he  always  teaches  us,  that  this  mode  of  expenditure 
of  our  property  is  more  pleasing  to  him  than  any  other. 
With  this  mode  of  charity  I  have  now  nothing  to  do. 
I  speak  only  of  provisions  for  the  support  of  the  poor, 
simply  because  he  is  poor  ;  and  of  provisions  to  sup|)ly 
his  wants,  without  requiring  the  previous  exertion  of  his 
labor.  Of  this  kind  are  poor  laws,  as  they  are  estab- 
lished in  England,  and  in  some  parts  of  our  own  country, 
and  permanent  endowments  left  to  particular  corpora- 
tions for  the  maintenance  of  the  simply  indigent.  Now 
such  provisions  we  suppose  to  be  injurious,  for  several 
reasons. 

1 .  They  are  at  variance  with  the  fundamental  law  of 
government,  that  he  who  is  able  to  labor,  shall  enjoy 
only  that  for  which  he  has  labored.     If  such  be  the  law 

.of  God  for  us  all,  it  is  best  for  all,  that  all  should  be 
subjected  to  it.  If  labor  be  a  curse,  it  is  unjust  that 
one  part,  and  that  the  industrious  part,  should  suffer  it 
all.  If,  as  is  the  fact,  it  be  a  blessing,  there  is  no  rea- 
son why  all  should  not  equally  enjoy  its  advantages. 

2.  They  remove  from  men  the  fear  of  want,  one 
of  the  most  natural  and  universal  stimulants  to  labor. 
Hence,  in  just  so  far  as  this  stimulus  is  removed,  there 


PCCR    LAWS.  Ill 

will  be,  in  a  given  community,  less  labor  done  ;  that  is, 
less  product  created. 

3.  By  teaching  a  man  to  depend  upon  others,  rather 
ihan  upon  himself,  they  destroy  the  healthful  feeling  of 
independence.  When  this  has  once  been  impaired,  and 
the  con6dence  of  man  in  the  connexion  between  labor 
and  reward  is  destroyed,  he  becomes  a  pauper  for  life. 
Ft  is  in  evidence,  before  the  committee  of  the  British 
Elouse  of  Commons,  that,  after  a  family  has  once  appli- 
ed for  assistance  from  the  parish,  it  rarely  ceases  to  ap- 
ply regularly,  and  most  frequently,  in  progress  of  time, 
for  a  larger  and  larger  measure  of  assistance 

4.  Hence,  such  a  system  must  tend  greatly  to  increase 
the  number  of  paupers.  It  is  a  discouragement  to  in- 
dustry, and  a  bounty  upon  indolence.  With  what  spirit 
will  a  poor  man  labor,  and  retrench,  to  the  utmost,  his 
expenses,  when  he  knows  that  he  shall  be  taxed  to  sup- 
port his  next-door  neighbor,  who  is  as  able  to  work  as 
himself  ;  but  who  is  relieved  from  the  necessity  of  a 
portion  of  labor,  merely  by  applying  to  the  overseer  of 
the  poor  for  aid. 

5.  They  are,  in  principle,  destructive  to  the  right  of 
property,  because  they  must  proceed  upon  the  conces- 
sion, that  the  rich  are  under  obligation  to  support  the 
poor.  If  this  be  so  ;  if  he  who  labors  be  under  obliga- 
tion to  support  him  that  labors  not ;  then  the  division  of 
property  and  the  right  of  property  are  at  an  end  :  for,  he 
who  labors  has  no  better  right  to  the  result  of  his  labor, 
than  any  one  else. 

6.  Hence,  they  tend  to  insubordination.  For,  if  the 
rich  are  under  obligation  to  support  the  poor,  why  not 
to  support  them  better  .'  nay,  why  not  to  si'pport  them 
as  well  as  themselves  ?  Hence  the  larger  provision  there 
is  of  his  kind,  the  greater  will  be  the  liability  to  coUis 
ion  between  the  two  classes. 

If  this  be  so,  we  see,  that  in  order  to  accomplish  the 
designs  of  our  Creator  in  this  respect,  and  thus  present 
the  strongest  inducement  to  industry, 

I .    Property  should  be  universally  appropriated,  so 
that  nothing  is  left  in  common. 
11 


122  POOR    LAW?. 

2.  The  riglit  of  property  should  be  perfectly  proteM 
ed,  both  against  individual  and  social  spoliation. 

3.  There  should  be  no  funds  in  cointnon  provided  for 
the  siapport  of  those  who  are  not  willing  to  labor. 

4.  That  if  a  man  be  reduced,  by  indolence  or  prodi 
cality,  to  such  extreme  penury  that  he  is  in  danger  o( 
perishing,  he  should  be  relieved,  through  the  medium  of 
labor  ;  that  is,  he  should  be  furnished  with  work,  and  be 
remunerated  with  the  proceeds. 

5.  That  those  who  are  enabled  only  in  part  to  earn 
their  subsistence,  be  provided  for,  to  the  amount  of  that 
deficiency  only. 

And  hence,  that  all  our  provisions  for  the  relief  of  the 
poor,  be  so  devised  as  not  to  interfere  with  this  law  of 
our  nature.  By  so  directing  our  benevolent  energies, 
the  poor  are  better  provided  for  ;  they  are  happier  them- 
selves ;  and  a  great  and  constantly  increasing  burden  is 
removed  from  the  community.  It  has  been  found  that 
alms-houses,  conducted  on  this  plan,  will  support  them- 
selves ;  and  sometimes  even  yield  a  small  surplus  rev- 
enue. This  surplus,  however,  should  always  be  given 
to  the  paupers,  and  should  never  be  received  by  the 
public.  The  principle  should  be  carried  out,  that  the 
laborer  is  to  enjoy  the  result  of  his  industry. 

For  the  same  reason,  penitentiaries  and  State  prisons 
should  always  be  places  of  assiduous  and  productive  la- 
bor. Idleness  is  a  most  prolific  parent  of  crime.  If 
the  vicious  could  be  accustomed  to  labor,  one  half  of 
their  reformation  would  be  effected. 

Besides,  by  this  means,  a  great  diminution  would  be 
effected  in  the  expense  to  the  community.  There  can 
be  no  reason  why  a  hundred  able-bodied  men,  and  such 
are  generally  the  tenants  of  our  prisons,  should  not  both 
support  themselves,  and  pay  for  the  superintendence 
necessary  to  their  labor.  In  a  well  regulated  prison, 
they  will  always  do  this.  There  must  always  be  some- 
thing deeply  culpable  in  the  arrangements  of  such  an 
institution,  where  this  is  not  the  result. 

And  thus  where  a  society  is  so  organized,  that  ever} 
man  is    left  to  suffer  the  results  of  idleness  ;  that  is, 


RATIO    OF    CAPITAL    TO    LABOR  123 

where  labor  is  made  necessary  to  the  acquisition  oi  every 
thing  desirable,  and  where  the  resuhs  of  that  labor  are 
most  perfectly  secured  to  the  laborer,  there  will  exist  the 
greatest  stimulus  to  labor,  and,  of  course,  production 
will  be  most  rapidly  augmented. 


SECTION  IV. 

THE  GREATER  THE  RATIO  OF  CAPITAL  TO  LABOR, 
THE  GREATER  WILL  BE  THE  STIMULUS  TO  LABOR. 

The  principle  "to  be  considered  in  this  section  may  be 
thus  illustrated.  Capital  is  useless,  that  is,  will  yield 
no  revenue,  unless  it  be  united  with  labor.  A  farm  will 
yield  nothing,  unless  it  be  tilled,  and  the  grain  harvested  ; 
raw  cotton  and  a  manufactory  will  produce  nothing,  un- 
less there  be  workmen  to  labor  in  it.  Hence,  every 
man  who  holds  capital.,  is  desirous  of  uniting  it  with  in- 
dustry, that  he  may  share,  with  the  laborers,  the  profits 
of  the  resulting  product.  On  the  contrary,  he  who  has 
industry.,  is  desirous  of  uniting  it  with  capital,  because, 
unless  he  can  so  unite  it,  it  will  yield  nothing  in  return. 
A  man  can  earn  nothing  by  spending  his  whole  time  in 
beating  the  air.  Hence,  when  the  number  of  laborers 
is  great ;  that  is,  where  labor  is  abundant,  and  the 
amount  of  capital  small,  there  will  be  a  competition  of 
laborers  for  work,  and  the  price  of  labor  will  fall  ;  that 
is,  the  laborer  will  receive  a  less  compensation  for  his 
v^ork.  On  the  contrary,  when  the  number  of  laborers 
is  small,  and  the  amount  of  capital  great,  there  will  be 
competition  among  capitalists  for  labor  ;  that  is,  the 
price  of  labor  will  rise  ;  and  the  laborer  will  receive  a 
greater  compensation  for  his  work.  Thus,  we  see,  the 
greater  the  amount  of  capital,  in  proportion  to  the  num- 
ber of  laborers,  the  greater  will  be  the  rate  of  wages, 
and,  of  course,  the  stronger  the  stimulus  to  industry. 

It  deserves,  however,  to  be  remarked,  that  this  prin- 
ciple is  liable  to  some  important  modifications.      Thus,  it 


124  RATIO    OK    CAPITAL    TO    LABOR. 

IS  practically  true,  only  in  so  far  as  men  contii.ue  to  be 
operated  upon  by  the  hope  of  reward.  When  this  ceas- 
es to  operate,  and  wages  are  so  low  as  to  render  the 
utmost  amount  of  labor  necessary  to  avoid  starvation, 
men  will  work  more  assiduously,  the  lower  the  wages  ; 
that  is,  the  nearer  they  are  to  actual  starvation.  But,  to 
this,  there  is  also  a  limit.  Human  beings  cannot  long 
endure  great  toil,  under  the  depressing  influences  of  de* 
spair.  Many  very  soon  die,  and  thus  a  diminished  pop- 
ulation again  raises  the  price  of  labor.  Another  com- 
mon result  of  such  a  condition  of  laborers,  is  domestic 
insurrection.  Men  who  have  long  stood  on  the  borders 
of  starvation,  become  desperate.  They  know,  that  by 
no  change  could  their  condition  be  made  worse  ;  hence 
cupidi  rerum  novarum,  they  unite  under  any  agitator 
who  promises  them  bread  ;  the  whole  fabric  of  society 
is  prostrated  ;  and  civil  war  and  anarchy  succeed. 

Another  modification  of  this  principle,  is  the  follow- 
ing :  I  have  said  above,  that  the  stimulus  to  labor  is  in 
proportion  to  the  wages  of  labor.  This  will  be  true, 
only  of  those  cases  where  the  facilities  of  gratifying 
desire  are  equal.  Although  wages  be  high,  yet  if  only 
few  objects  of  desire  can  be  procured  in  exchange  for 
them,  there  will  be  wanting  one  important  element  in 
stimulating  the  human  being  to  labor.  Hence^  the  stim- 
ulus to  labor  will  be  the  most  effective,  when  the  wages 
are  highest,  and  when,  by  means  of  wages,  the  greatest 
number  of  desires  can  be  gratified. 

Thus,  in  a  newly  settled  country  of  great  fertUity, 
wages  are  high,  because  a  vast  amount  of  land  is  open 
to  cultivation,  and  a  proprietor  can  afford  to  give  a  high 
price  for  labor.  Still,  industry  is  not  active  in  propor- 
tion to  the  rate  of  wages,  because,  the  desires  which 
can  be  gratified  in  a  new  country  are  few,  and  a  man  can 
procure  all  that  is  attainable  with  a  less  amount  of  labor 
than  he  i?  able  to  exert.  Hence,  the  reason  why  men 
labor  so  intensely  in  piosperous  seasons,  in  large  cities. 
The  remuneration  at  such  times  is  high,  and  the  desires 
which  wealth  can  gratify  are  innumerable.  A  merchant 
in  New  York,  during  the  season  of  business,  when  prof- 


RATIO    OF    CAPITAL    TO     LABOR.  126 

its  are  high,  will  cheerfully  impose  upon  himself,  labor, 
which  he  knows  will,  m  all  probability,  ruin  his  constitu- 
tion ;  labor,  which,  he  would  not,  on  any  account,  im- 
pose upon  a  slave. 

Hence,  we  see  that  the  accumulation  of  capital  is 
more  for  the  advantage  of  the  laborer  than  of  the  capi- 
talist. The  greater  the  ratio  of  capital  to  labor,  the 
greater  will  be  the  share  of  the  product  that  falls  to  the 
laborer.  The  greater  the  ratio  of  labor  to  capital,  the 
greater  will  be  the  share  of  the  product  that  falls  to  the 
capitalist.  Hence,  the  laboring  classes  are  really  more 
interested  in  the  increase  of  the  capital  of  a  country, 
than  the  wealthy  classes.  Hence,  when  one  class  of 
the  community  repine  at  the  prosperity  of  another  class, 
they  repine  at  their  own  mercies,  and  the  means  of  in- 
creasing their  own  rate  of  compensation. 

It  IS,  however,  evident,  that  the  accumulation  of  capi- 
tal, in  any  nation,  does  not  depend  simply  upon  its  annual 
production,  but  upon  the  proportion  that  its  annual  pro- 
duction bears  to  its  annual  expenditure.  A  country  that 
annually  expends  all  its  production,  let  it  produce  ever 
so  much,  will  never  increase  its  capital.  A  country  that 
produces  ever  so  little,  if  it  annually  expend  somewhat 
less  than  its  revenue,  will  be  accumulating  something  ; 
and  must,  in  progress  of  time,  become  richer  than  its 
more  highly  favored  neighbor.  This  explains  the  fact, 
that  the  countries  blessed  with  the  richest  soils,  and  the 
greatest  natural  advantages,  have  not  generally  become 
the  richest.  The  result  has,  within  moderate  limits, 
l)een  almost  the  reverse. 

Hence,  we  see,  that  every  mode  of  unnecessary  ex 
penditure,  whether  individual  or  national,  by  dimini.>hing 
the  annual  accumulation  of  capital,  tends  directly  to 
lower  the  rate  of  wages,  and  thus  injure  the  condition  of 
the  laboring'  classes.  The  millions  which  are  wasted 
and  destroyed  by  intemperance,  if  saved,  would  add  to 
the  capital  of  a  country,  arid  thus  increase  the  demand 
for  labor.  All  unnecessary  expenditure,  for  the  main- 
tenance of  civil  government,  has,  of  course,  the  same 
tendency.  Hence  arises,  also,  one  of  the  most  afflicting 
11* 


126  iNTELLF.CTL'AL    1MPR0VEME^'T. 

consequences  of  war.  Had  the  almost  incalculable  sums 
which  Great  Britain  has  expended  in  wars,  for  the  last 
hundred  years,  been  added  to  her  operative  capital,  aud, 
but  for  these  wars,  it  would  have  been  so  added,  all  her 
inhabitants  would  have  found,  at  all  times,  abundant  em- 
l)loynient,  and,  at  a  rate  of  wages,  which  would,  by  this 
time,  have  banished  almost  the  recollection  of  poverty 
from  her  shores. 


SECTION  V. 

INDUSTRY  WILL  BE  APPLIED  TO  CAPITAL,  IN  PROPOR- 
TION TO  THE  INTELLECTUAL  IMPROVEMENT  OF  A 
PEOPLE. 

Intellectual  cultivation  tends  to  increase  the  industry 
of  a  people,  in  two  ways.  1st.  By  exciting  a  people 
to  exertion  ;  and,  2d.   By  directing  that  exertion. 

1.  Intellectual  cultivation  excites  a  people  to  exertion. 
Ignorant  men  are  indolent,  because  they  know  neither 
the  results  that  may  be  accomplished,  nor  the  benefits 
that  may  be  secured,  by  industry.  This  is  one  of  the 
most  common  causes  of  the  great  indolence  of  savage 
nations.  An  Indian,  who  knows  of  no  condition  better 
than  his  own,  of  no  covering  better  than  a  skin,  of  no 
habitation  better  than  his  wigwam,  and  of  no  weapon 
better  than  his  bow  and  arrow,  has  no  motive  to  industry, 
beyond  what  may  be  adequate  to  procure  these  simple 
necessaries.  Let  him  know  that,  by  additional  effort, 
he  can  provide  himself  with  a  blanket,  and,  by  a  still 
additional  effort,  that  he  can  exchange  his  bow  and  ar- 
row for  a  rifle,  and  his  wigwam  for  a  comfortable  house, 
and  you  present  motives  to  additional  labor.  His  indus- 
try will  thus  expand  with  the  occasion.  The  case  is 
I  he  same  with  a  nation,  at  a  more  advanced  period  of 
its  history.  Hence,  the  impulse  which  is  always  given 
to  industry,  by  any  important  improvement  in  the  intel- 


INTKLLr-CrUAL     I.MJ'IIOV'EMENT.  127 

leetual  character  of  a  people.  It  was  a  knowledge  of 
the  conveniences  and  luxuries  of  the  East,  which  the 
crusaders  brought  back  to  western  Europe,  that  was  the 
precursor  and  the  cause  of  that  dawning  of  improvement 
which  succeeded  the  night  of  the  dark  ages. 

2.  Intellectual  cultivation  directs  to  a  profitable  end, 
the  industry  which  it  has  previously  excited. 

Agriculture  will  be  successfully  prosecuted,  only  hi 
proportion  as  men  are  acquainted  with  the  best  modes 
and  seasons  of  culture,  the  laws  of  vegetable  and  ani- 
mal physiology,  and  the  probable  existence  of  that,  de- 
mand which  it  will  be  most  profitable  to  supply. 

Manufacturing  labor  will  be  successful,  in  proportion 
as  the  manufacturer  is  able,  by  his  knowledge,  to  avail 
himself  of  the  improvements  of  other  countries,  to  un- 
derstand the  laws  of  nature,  and  invent  means  of  apply- 
ing them  to  his  own  advantage,  and  as  he  is  able,  by  his 
intelligence,  to  modify  his  occupation  in  any  manner  that 
may  be  for  his  interest. 

The  Merchant  will  be  successful  in  proportion  as  he 
is  able  to  select  the  most  profitable  places  and  times  for 
exchange,  to  foresee  the  probable  alternations  of  the  mar- 
ket, and  to  avail  himself  of  the  fluctuations  of  capital 
which  are  always  taking  place,  in  various  parts  of  the 
civihzed  world. 

And,  in  general,  it  is  evident  that,  with  a  given  amount 
of  labor  and  of  capital,  production  will  be  exactly  in 
proportion  to  the  knowledge  which  the  operator  pos- 
sesses of  the  laws  which  govern  that  department  in  vvhfch 
he  labors,  and  to  the  degree  in  which  his  labor  conforms 
to  his  knowledge.  Tf,  then,  labor  will  be  in  propoition 
to  the  benefits  which  it  confers  ;  and  if,  by  knowledge, 
'hese  benefits  are  increased,  we  see  in  what  manner  labor 
inustbe  stimulated  by  intellectual  cultivation.  Thus  we 
3ee  how  it  is,  that  an  intelligent  people  is  always  indus- 
trious, and  an  ignorant  people  always  indolent.  Hence, 
one  of  the  surest  means  of  banishing  indolence,  is  to 
banish  ignorance  from  a  country. 

But,  it  is  evident,  that  improvement  in  knowledge,  in 
order  to  be  in  an}'  signal  degree  beneficial,  must  6e  tint' 


128  INTELLECTUAL    IMPROVEMENT. 

versal.     A  single  individual  can  derive  but  little  advan 
tage  from  his  knouledge  and  industry  if  he  be  surround 
ed  by  a  community  both  ignorant  and  indolent.     In  jusi 
so  far  as  other  men  improve  their  condition,  and  become 
useful  to   themselves,  they  become  useful  to  him  ;  and 
both  parties  tlius  become  useful  to  each  other.     Tiiis  is" 
■specially  the  case,  where  a  government  is,  in  its  charac- 
ter, popular  ;  that  is,  where  laws  emaiiate  from  the  more 
numerous  classes.     In  such  a  case,  not  only  is  an  intel 
iigent  man  not   benefited,  but  he  is  positively  injured,  by 
the  ignorance  and  indolence  of  his  neighbors.     Hence, 
the  reason  why  every  man  has  a  personal  interest  in  the 
intellectual  improvement  of  every  one  of  his  fellow  citi- 
zens ;  and  why  the  education  of  the   whole  population, 
should  be  the  care  of  the  government ;  that  is,  of  the 
whole  country. 

The  efforts  of  a  government  maybe  usefully  directed, 
in  this  respect,  to  two  objects.  1  st.  The  increase  ;  and 
2d.   The  dissemination  of  knowledge. 

First.  The  increase  of  knowledge.  This  may  be 
promoted  in  several  ways. 

1.  By  the  establishment  of  colleges,  universities,  and 
other  seminaries  of  learning.  These,  I  suppose,  should 
be  furnished  by  the  public,  with  libraries,  apparatus,  and 
all  the  means  for  instruction,  investigation,  and  discovery. 
They  should  be  so  governed,  and  the  remuneration  so 
adjusted,  that  teachers  should  be  placed  under  the 
strongest  stimulus  to  labor  for  the  promotion  of  science, 
and  to  communicate,  most  successfully,  knowledge  to 
their  pupils.  Colleges  and  universities  should,  at  all 
limes,  be  places  of  strenuous  effort,  and  vigorous  men- 
tal discipline,  on  the  part  of  both  instructors  and  pupils. 
As  soon  as  they  become  the  places  of  literary  leisure, 
ana  intellectual  indolence,  they  are  not  only  useless,  but 
hurtful ;  inasmuch  as  they  retard,  rather  than  advance, 
the  progress  of  science. 

For  this  reason,  I  doubt  whether  endowments,  for  the 
support  of  professorships,  are  useful  ;  at  least,  whenever 
they  render  a  teacher's  support  independent  of  his  own  " 
exertions.     For  the  same  reason,  a  teacher  should  not 


INTELLECTUAL  IMPROVEMENT.         12!*. 

be  remunerated  by  a  fixed  salary,  but  by  the  sale  of 
tickets  of  admission  to  his  lectures,  or  by  a  salary,  vary- 
ing with  his  ability  and  success.  Large  foundations  for 
the  support  of  students  in  colleges,  if  under  the  control 
of  the  college  itself,  so  far  as  tliey  render  the  number 
of  students  in  no  way  dependent  upon  the  ability  and 
faithfulness  of  the  instructor,  will  have  a  tendency  to 
remove  from  him  one  of  the  most  valuable  stimulants  lo 
industry. 

2.  By  rewarding  those  who  have  been  successful  in 
ihe  advancement  of  science. 

1.  This  may  be  done,  first.  Directly,  as  by  bestowing 
premiums,  rewards,  grants  of  money,  &c.,  to  those  who 
have  made  discoveries  of  pre-eminent  utility.  This  is 
frequently  done  by  the  British  government ;  aid,  for 
aught  I  see,  it  is  done  wisely.  In  this  country,  however, 
it  is,  I  believe,  never  practiced.  The  only  rewards 
which  we  ever  confer,  are  for  military  or  naval  service. 
The  propriety  of  those,  I  by  no  means,  in  this  place, 
dispute  ;  yet,  I  think  it  would  be  difficult  to  show,  that 
warriors  are  the  only  benefactors  of  mankind,  or  that 
Whitney  or  Fulton  did  not  deserve  as  well  of  their  coun- 
try, for  the  invention  of  the  cotton  gin  and  the  applica- 
tion of  steam  to  navigation,  as  they  would  have  done, 
had  they  captured  a  fleet  on  the  ocean,  or  routed  a  tribe 
of  Indians  in  the  forest. 

2.  Indirectly,  by  granting  to  those  who  labor  in  sci- 
ence or  invention,  the  right  to  derive  advantage  fiom 
their  discoveries  or  inventions.  This  is  done  by  laws  of 
copy  and  patent  right.  The  justice  of  this  provision 
we  have  elsewhere  shown.  We  here  see  the  manner, 
in  which,  by  stimulating  intellectual  labor,  by  hope  of 
reward,  it  tends  to  increase  knowledge,  and  hence,  fa* 
ciiitate  production. 

Secondly.  A  government  may  improve  the  intellect- 
ual character  of  a  people,  by  the  dissemination  of  knowl- 
edge. This  will  be  done,  so  far  as  provision  is  made 
for  the  universal  instruction  of  a  people  in  the  elements 
of  a  common  education.  The  interest  of  every  n>an 
demands  that  ah  his  fellow  citizens  should  be  able  lo 


I 

130  BENEFITS    OF    RELIGION. 

read  and  write,  to  keep  accounts,  to  understand  geogra- 
phy, and  thus  possess  the  means  of  self-improvement,  to 
whatever  degree  they  may  be  disposed  to  carry  it. 

The  effect  of  such  a  diffusion  of  knowledge,  has  al- 
read)  been  illustrated  at  sufficient  length.  It  will  be 
necessary  here  only  to  allude  to  the  means,  by  which 
this  result  may  be  best  attained. 

1 .  As  a  stimulus  to  intellectual  improvement,  proba- 
bly, the  right  of  suffrage  should  be  restricted  to  those 
who  are  able  to  read  and  write. 

2.  Provision  should  be  made,  in  every  neighborhood, 
for  the  education  of  all  children  under  a  certain  age. 

3.  The  expenses  of  this  provision  may  be  borne, 
partly,  by  a  general  fund.  This  fund  should,  however, 
never  defray  more  than  a  portion  of  the  expense  ;  for 
no  man  values,  highly,  what  he  gets  for  nothing.  If  a 
fund  be  raised  for  this  purpose,  great  care  must  be  taken 
that  it  be  not  abused. 

4.  Without  a  fund,  the  same  result  will  probably  be 
better  accomplished  by  obliging  every  district,  contain 
ing  a  given  number  of  inhabitants,  to  provide  itself  with 
a  school,  on  penalty  of  a  fine  to  be  paid  to  the  school 
districts  in  its  neighborhood,  for  the  purposes  of  in- 
struction. 

5.  To  complete  this  arrangement,  it  might,  probably, 
be  desirable  that  seminaries  be  provided  for  the  purpose 
of  educating  teachers  for  the  primary  schools.  This 
would  ensure  a  supply  of  instructors,  of  assured  quaHfi- 
cations,  without  which,  such  a  system  might  not  so  read- 
ily go  into  successful  ojieration. 

And  now,  to  sum  up  what  has  been  said :  It  will  be 
seen  that  the  inducements  to  labor,  and,  hence,  of 
course,  the  wealth  and  means  of  happiness,  in  any  given 
country,  must  depend,  principally,  upon  two  conditions 
1st.  The  degree  of  its  intelligence  ;  and,  2d.  The  pu- 
rity of  its  moral  character. 

1 .  On  its  intelligence  will  depend  its  knowledge  of  its 
own  advantages,  of  the  laws  of  nature,  and  of  the  means 
by  which  it  may  avail  itself  of  those  laws,  for  the  promo- 
tion of  its  own  happiness.  ]  A  nation  without  knowledge, 


BENEFITS     OF    REI.IGIO!!.  I'J^. 

like  a  blind  man  in  the  garden  of  Eden,  might  be  sur- 
rounded with  every  thing  lovely  to  the  eye  or  delightful 
to  the  taste,  without  ever  being  able  to  ascertain,  either 
where  a  single  object  of  desire  was  to  be  found,  or  how 
the  possession  of  it  might  be  secured. 

2.  On  the  moral  character  of  a  nation  depends  the 
justice  of  its  laws,  its  respect  for  individual  right,  seru- 
rity  of  propertv.  individual  and  social  virtue,  together 
with  the  industry  and  frugality  which  are  their  invariable 
attendants. 

Of  these  two,  the  latter  is  the  more  important  to 
national  prosperity.  For,  where  virtue,  frugahty,  and 
respect  for  right  exist,  riches  will,  by  natural  conse- 
quence, accumulate  ;  and  intellectual  cultivation  will,  of 
necessity,  succeed.  But,  intellectual  cultivation  may 
easily  exist,  without  the  existence  of  virtue  or  love  of 
right.  In  this  case,  its  only  effect  is,  to  stimulate  desire, 
and  this,  unrestrained  by  the  love  of  right,  must  eventu- 
ally overturn  the  social  fabric  which  it  at  first  erected. 
Hence,  the  surest  means  of  promoting  the  welfare  of  a 
country  is,  to  cultivate  its  intellectual,  but  especially  its 
moral  character.  Until  this  have  been  done,  no  perma- 
nent foundation  for  a  nation's  prosperity  has  yet  been 
laid.  And,  if  anj  one  wil'  take  the  pains  to  examine, 
he  will  find,  that,  other  things  being  equal,  the  wealth, 
and  happiness,  and  power  of  every  nation,  are  in  exact 
proportion  to  its  intellectual  and  moral  character. 

And,  here,  it  may  not  be  amiss  to  add,  that  all  true 
benevolence  may  be  defended,  no  less  upon  principles 
of  political  economy,  than  of  philanthropy.  The  circu- 
lation of  the  Scriptures,  the  inculcation  of  moral  and 
religious  truth  upon  the  minds  of  men,  by  means  of 
Sabbath  schools,  and  the  preaching  of  the  Gospel,  aio 
of  the  veiy  greatest  importance  to  the  productive  ener- 
gies of  a  country.  The  argument  is  very  short,  but  ii 
seems  very  conclusive.  No  nation  can  rapidly  accumu- 
late or  lon^  enjoy  the  means  of  happiness,  except  as  it 
is  pervaded  by  the  love  of  individual  and  social  right  ; 
but  the  love  of  individuaTand  social  right  will  never  pre- 
vail   williout  the  practical   influence  of  the  motives  and 


133  BENEFITS     OF     RELI6I0IV. 

Ranctions  of  religion  ;  and  these  nnotives  anil  sanctions 
will  never  influence  men,  unless  they  are,  by  hunian  ef- 
fort, brought  to  bear  upon  the  conscience. 

The  same  principles  will  defend,  upon  economical 
grounds,  the  efforts  of  benevolence  on  behalf  of  foreign 
nations.  Intelligence,  virtue,  and  equitable  laws,  will 
have  the  same  effect  upon  other  men,  that  they  ha \e 
upon  us.  They  will  render  men  industrious,  frugal,  ai  .1 
consequently  rich,  and  raise  them  from  a  savage  to  a 
civilized  state.  Just  in  proportion  as  a  ration  is  thus 
transformed,  are  its  products  increased  ;  the  riches  of 
the  whole  world  are  augmented  ;  the  portion  of  wealth, 
which  falls  to  the  share  of  each  man,  is  rendered  great- 
er ;  and  the  ratio  of  capital  to  labor  is  higher.  Just  as 
a  nation  becomes  intelligent  and  rich,  its  wants  are  mu'- 
ti plied,  and  the  means  for  supplying  them  are  provided. 
Hence,  it  becomes  a  better  customer  to  other  nations  ; 
it  gives  an  additional  impulse  to  their  industry  ;  and  it 
repays  them  for  their  products,  with  whatever  God  has 
bestowed  upon  it,  which  will  add  to  the  happiness  of 
others.  Can  any  one  doubt  that  Great  Britain  and 
France  reap  incomparably  greater  advantages  from  eacii 
other,  in  their  present  condition  of  advanced  civilization, 
than  either  of  them  would,  if  the  other  were  in  the  con- 
dition in  which  it  was  found  by  Julius  Caesar  ?  What 
demand  would  Great  Britain  make  upon  the  productions 
of  France,  if  she  were,  at  this  moment,  inhabited  by 
half-naked  savages  ?  Or  again  :  How  much  greater  ben- 
efits does  North  America  confer  upon  the  world,  than  it 
would  if  it  were  peopled  by  its  aboriginal  inhabitants  ? 
How  great  a  stimulus  would  be  given  to  the  industry 
of  the  world,  at  this  time  ;  and  how  greatly  would  the 
comforts  and  luxuries  of  men  be  hicreased,  if  Africa 
were  peopled  by  civilized  and  christianized  men  ?  Now, 
if  these  thing?  be  so ;  and  that  they  are  so,  I  sec  not 
that  any  one  can  dispute  :  it  seems  to  me,  that  civilized 
nations  could  in  no  way  so  successfully  promote  their 
'own  interests,  as  by  the  universal  dissemination  of  the 
means  of  education  and  the  principles  of  religion 


PROTECTING    DUTIES.  133 


SECTION  VI. 

ON    THE    EFFECTS    OF    DIRECT    LEGISLATION    AS    A 
MEANS    OF    INCREASING    PRODUCTION. 

1  have  thus  far  said  nothing  upon  the  effect  of  legisla- 
tive enactments,  by  means  of  bounties  and  protecting 
duties,  as  a  means  of  increasing  production.  The  rea- 
son is,  that  I  have  not  yet  been  able  to  discover  in  what 
manner  they  produce  this  effect.  Nevertheless,  since 
many  persons  suppose  them  to  be  of  great  importance, 
it  might  seem  that  a  discussion  of  this  subject  was  in- 
complete, if  they  were  passed  over  in  silence.  I  shall 
devote  this  section  to  a  consideration  of  their  effects. 

1.  Duties  of  this  sort  are  to  be  considered  apart  from 
those  levied  for  the  support  of  government,  because 
they  are  either  not  necessary  for  this  purpose,  or  else 
they  are  levied  for  a  different  object.  Thus,  if  five  per 
cent,  on  an  import  be  necessary  to  the  support  of  govern- 
ment, and  ten  per  cent,  be  levied,  in  order  to  favor,  or- 
as  it  is  said,  to  protect  one  branch  of  industry,  the  addi- 
tional five  per  cent,  is  levied  for  a  distinct  object,  aside 
fr{»m  that  of  the  support  of  government.  It  is  only  this 
latter  part  of  the  duty  which  we  propose  to  consider ; 
that  is,  so  much  of  the  duty  as  is  levied  for  the  purpose 
of  favoring  one  particular  product. 

2.  Now,  if  such  a  duty  have  any  effect  upon  the  pro 
.ductiveness  of  a  nation,  it  must  be  in  one  of  these  ways 

It  must  either  first  increase  the  capital  of  a  country  ;  or, 
secondly,  increase  its  number  of  laborers;  or,  third, 
create  a  greater  stimulus  to  labor.  I  think  it  evident, 
from  what  has  already  been  shown,  that  every  conditicm 
which  affects  production,  must  exert  its  influence  in  one 
of  these  three  methods. 

3.  I  think  it  evident,  that  legislation  of  this  sort  can- 
not increase  the  capital  of  a  country.  The  capital  of  a 
country,  jit  any  moment,  is  its  present  amount  of  annual 
and  fixed  capital.     Now,  a  law  cannot  create  ca])iial  ; 

12 


134  PROTECTING    DUTIES. 

Since,  if  it  could,  there  would  be  no  necessity  for  an) 
other  labor  than  that  of  legislation  ;  and,  in  order  to 
grow  rich,  a  nation  would  have  nothing  to  do  but  meet 
in  public  assembly,  and  spend  its  whole  time  in  making 
and  hearing  speeches,  and  enacting  laws.  1  believe, 
however,  that  this  mode  of  growing  rich,  has  never  been 
found  remarkably  successful. 

If  it  be  said  that,  in  this  manner,  we  shall  attract  foreign 
capital  to  our  own  country,  I  answer  :  this  depends  noi 
upon  legislation,  but  upon  the  rate  of  interest,  and  the 
security  of  property.  If  these  conditions  be  more  fa- 
vorable here  than  in  another  country,  capital  will  flow 
hither.  If  they  be  more  favorable  in  another  country 
than  here,  it  will  flow  thither.  The  system  of  Great 
Britain  has  been  exclusive,  but  capital  does  noj  go  from 
this  country  to  be  invested  there. 

4.  Legislation  of  this  kind  cannot  increase  the  actu- 
al number  of  laborers.  The  number  of  laborers  is  as 
the  number  of  inhabitants.  Legislation  has  never  been 
supposed  to  have  any  power  to  create  men.  It  is  true, 
population  is  found  always  to  increase  with  the  increase 
of  the  means  of  living  ;  that  is,  with  the  increase  of  the 
productiveness  of  labor.  Population  will  increase  or 
diminish,  just  in  proportion  as  a  laborer  is  able  to  pro- 
cure greater  or  less  wages  for  a  day's  labor  ;  that  is,  as 
every  thing  is  cheaper  or  dearer.  Whether  the  tenden- 
cy of  duties  is  to  render  productions  cheap,  remains  to 
be  considered.  It  must,  however,  be  evident  to  all, 
that  laws  do  not  create  human  beings  ;  of  course,  they 
add  nothing  to  the  number  of  laborers,  that  is,  of  hnnian 
beings  in  a  country. 

It  may  be  said,  we  may  thus  induce  laborers  to  come 
from  other  countries.  To  this  it  may  be  answered  ;  tirs 
will  depend  upon  the  wages  of  labor.  If  laborers  bo 
better  paid  here  than  elsewhere,  they  will  come  here, 
and  not  otherwise.  Besides,  what  is  called  protection 
changes  only  the  mode  of  labor  ;  that  is,  it  takes  men 
from  one  mode  of  labor,  to  employ  then  upon  another. 
Suppose,  then,  that  it  attracts  foreign  laborers  to  one 
branch  of  industry  ;  it  deters  those  in  another  branch  of 
industry  from  iirtmigrating.      If,  for  instance,  manufactur- 


PROTECTING    DUTIES.  135 

ers  are  protected,  this  will  tend  to  encourage  manufac- 
turers to  immigrate  ;  but  it  will,  in  a  correspondent  pro- 
portion, discourage  agriculturists. 

5.  If,  then,  discriminating  duties  produce  any  effect 
upon  production,  it  must  be  by  stimulating  industry  ; 
that  is,  while  the  amount  of  capital  and  the  number  of 
laborers  remain  the  same,  by  stimulating  men  to  labor 
more  industriously,  and  thus  to  create  a  greater  amount 
of  production  than  Uiey  would  under  other  circumstan- 
ces. This,  I  believe,  is  supposed  to  be  the  way  in 
which  the  system  produces  its  effect.  This  is  the  point 
of  view  in  which  we  shall  now  proceed  to  consider  it. 

The  manner  in  which  this  is  done  is  the  following:  Sup- 
pose a  country  to  be  under  a  free  system,  and  that  every 
one  is  devoting  himself  to  agriculture,  commerce,  or 
manufactures,  as  he  finds  it  the  most  for  his  interest ;  un- 
der these  circumstances,  there  will  be  a  certain  average 
of  productiveness,  both  of  labor  and  of  capital.  Wool- 
len cloth  can  be  procured,  by  exchange,  for  five  dollars 
a  yard  ;  but  it  cannot,  in  the  present  state  of  the  coun- 
try, be  manufactured  for  less  than  ten  dollars  a  yard  ; 
that  is,  capital  and  labor  are,  in  every  thing  else,  so  pro- 
ductive, that  they  could  not  be  abstracted  from  other 
employments  at  the  same  rate  of  profit,  unless  the  man- 
ufacturer could  receive  ten  dollars  a  yard  for  his  cloth. 
Now  suppose,  that,  in  order  to  enable  him  to  do  this,  a 
duty  of  five  dollars  a  yard  is  levied  on  imported  cloth, 
by  which  the  price  of  all  cloth  is  raised  to  ten  dollars  a 
yard,  that  it  may  be  in  the  power  of  the  manufacturer, 
to  employ  his  capital  and  labor  in  this  manner.  There 
IS  no  doubt  that  thus  the  manufacture  of  cloth  might  be 
established. 

Now  I  think  it  evident,  upon  inspection,  that  the  pro- 
ductiveness of  labor  is  not,  by  this  operation,  increased. 
The  reason  why  cloth  was  not  manufactured  before, 
was,  that  the  productiveness  of  labor  and  capital,  in  this 
mode  of  investment,  was  lower  than  the  average  produc- 
tiveness of  labor  and  capital  in  other  modes  of  invest- 
ment. All  that  has  been  effected  is,  to  raise  the  pro- 
ductiveness   here    to    the    general    average    elsewhere. 


136  PROTECTING    DUTIES. 

There  has  been  nothing  done  to  render  it  any  greatei, 
either  in  this  or  in  any  other  employment ;  for  1  presume 
that  no  one  will  contend,  that  one  kind  of  industry 
should  be  really  more  highly  paid  than  another  ;  nor  that, 
if  it  were  desired,  it  could  be  effected  without  the  aid 
of  a  direct  monopoly. 

But  the  manufacturer  now  gets  ten  dollars  for  that 
which  before  would  bring  only  five.  Let  us  inquire 
whence  this  additional  five  dollars  comes. 

It  is  evident  that  government  possesses  nothing.  All 
that  it  possesses  is  precisely  so  much  taken  from  the  an- 
nual revenue  of  individuals.  In  this  case,  therefore,  it 
really  bestows  nothmg,  but  only  causes  a  transfer  of  an- 
nual revenues,  from  one  party  to  another.  The  case  is, 
therefore,  the  same  as  it  would  be  if,  while  there  had 
been  no  duty  imposed,  every  man  had  been  allowed  to 
buy  cloth  for  five  dollars  a  yard,  but  had  been  obliged, 
for  every  yard  that  he  bought,  to  pay  five  dollars  to  the 
manufacturer.  It  would  be  the  same  thing  to  both  par- 
ties as  at  present.  The  consumer  would  then,  as  now, 
pay  ten  dollars  a  yard  for  cloth,  and  the  manufacturer 
might  sell  it  for  five,  if  he  received  five  more  as  a  gra- 
tuity. The  five  dollars  that  have  been  added  to  the 
revenue  of  the  one,  are  precisely  five  dollars  taken  from 
the  revenue  of  the  other. 

Now  if  this  be  the  fact,  inasmuch  as  what  is  added  to 
the  productiveness  of  the  industry  of  the  one  class,  is 
taken  from  the  productiveness  of  the  industry  of  the 
other  class,  it  would  seem  that  what  the  one  has  gained 
the  other  has  lost  ;  and  hence,  that  there  can  be  no  in- 
creased stimulus  to  industry  on  the  whole^  since,  by  as 
much  as  the  one  is  stimulated,  the  other  is  depressed. 
But  this  is  not  all.  What  you  have  given  to  the  one 
class  has  only  raised  his  mode  of  labor  to  the  point  of 
productiveness  at  which  that  of  all  the  other  classes  ex- 
isted before  ;  while  the  means  by  which  this  has  been 
effected,  has,  to  the  whole  amount  of  its  effect,  reduced 
the  productiveness  of  all  the  other  classes  lower  than  it 
was  before.  By  just  as  much  as  this  productiveness  has 
been  diminished^  by  so  much  has  the  stimulus  to  indus- 
try been,  upon  the  whole,  decreased 


PROTECTING    DUTIES.  137 

But  secondly  ;  As  the  price  of  the  article  is  increas- 
ed, the  demand  for  the  article  is  diminished.  This  has 
been  before  illustrated.  There  will,  therefore,  be  less 
of  ilie  article  produced,  because  less  of  it  is  wanted. 
liy  all  this  diminution  is  the  demand  for  labor  diminish- 
ed ;  the  price  of  labor  must,  therefore,  fall,  and  the  stim- 
ulus to  labor  be,  by  so  much,  decreased. 

This  effect  will  lake  place,  in  what  manner  soever  the 
discriminating  duty  may  operate.  Suppose,  that  from 
scarcity  of  wool,  the  price  of  imported  cloth  had,  with- 
out any  duty,  been  doubled  .''  The  result  would  have 
been,  that  the  demand  would  so  l)ave  fallen  off,  that  mul- 
titudes would  have  been  thrown  out  of  employment,  and 
whole  establishments  would  have  been  ruined.  Sup- 
pose that,  by  a  duty,  we  exclude  the  foreign  cloth,  and 
make  it  ourselves,  but  at  double  the  price.  There  will 
be  a  less  quantity  made,  than  before.  But  the  imported 
cloth  was  not  to  be  had  for  nothing.  Some  of  our  own 
population  were  obliged  to  raise  the  products  which  we 
sent  in  exchange  for  it.  As  we  do  not  take  their  cloth, 
they  cannot  take  our  produce.  Of  course,  all  those 
wiio  labored  in  the  products  which  were  exchanged  for 
cloth,  are  out  of  employment.  There  was  a  demand  for 
a  sufficient  amount  of  their  labor  to  purchase  one  thou- 
sand bales  of  cloth  ;  suppose,  now,  there  is  a  demand 
for  labor  sufficient  to  make  only  five  hundred  bales  of 
cloth.  By  all  the  difference,  therefore,  between  the  la 
bor  necessary  to  procure  one  thousand  bales  by  ex- 
change, and  that  necessary  to  manufacture,  or  procure 
by  exchange,  five  hundred  bales,  is  the  demand  for  in- 
dustry diminished,  and,  of  course,  the  stimulus  to  in- 
dustry weakened. 

We  see,  then,  what  is  the  tendency  of  a  system  of 
this  kind.  First,  so  far  as  the  manufacturer  is  con- 
cerned, it  cannot  increase  his  profit  beyond  the  average 
profits  of  every  other  employment  ;  for,  if  competition 
be  allovvcul,  capital  and  labor  will  flow  into  it,  whatever 
may  be  its  advantages,  until  its  profits  fall  to  the  general 
level.  Secondly,  the  demand  for  other  labor  is  ditjiin- 
ished  hy  the  reduced  consumption  created  by  a  rise  Oi 
12* 


138  IKOTLCTING    DUTIES. 

price,  and  also,  as  ihis  rise  of  price  increases  the  ex- 
penses of  living,  it  makes  even  these  reduced  wages  ol 
less  value  than  they  were  before.  Hence  the  tendency 
is,  to  reduce  the  profit  of  capital  and  of  labor  in  ihe 
whole  community  lower  than  they  were  before  such  duty 
was  imposed.  To  this  reduced  average,  manufacturers 
must  themselves  conform  ;  and  hence,  by  this  very  op- 
eration, they  themselves  must  suffer.  Hence  we  see  the 
reason  why,  when  once  a  duty  is  imposed  for  the  pro- 
tection of  a  particular  branch  of  manufactures,  it  is  not 
long  before  a  larger  protective  duty  is  demanded  ;  and 
also  why  a  protective  duty,  which  at  first  is  followed  by 
great  manufacturing  enterprise  and  success,  is  so  com- 
monly afterwards  followed  by  so  universal  a  depression 
of  nianufacturing  industry. 

This  is  the  result,  so  far  as  the  effect  upon  our  own 
country  is  concerned.  But  this  is  not  all.  A  rise  of 
prices  must,  of  necessity,  follow  a  protecting  duty  ;  for 
this  is  its  very  object.  Its  object  is,  to  raise  the  price 
of  some  particular  product,  so  that  it  may  be  created 
where  it  could  not  be  created  before.  If  it  produce  no 
rise  of  prices  it  is  useless.  Now,  a  rise  of  prices  raises 
the  cost  of  production,  and,  by  its  whele  effect,  must 
raise  the  price  of  every  product  which  we  create.  By 
this  whole  effect,  therefore,  is  our  foreign  market  in- 
jured. If  we  can  raise  cotton  at  ten  cents  a  pound,  and 
bring  it  into  market  as  cheap  as  other  nations,  we  have 
as  good  an  opportunity  as  they  for  selling  it.  If  we  can 
raise  it  at  nine  cents,  we  can  undersell  them,  and  supply 
the  whole  market ;  or,  if  we  sell  it  at  the  same  price  as 
before,  we  gain  one  cent  more  on  the  pound.  If,  by  in- 
crease of  the  expenses  of  living,  we  cannot  raise  it  for 
less  than  eleven  cents  a  pound,  they  will  undersell  t«, 
and  we  shall  be  obliged  to  give  up  the  raising  of  cotton, 
either  partially  or  altogether  ;  and  the  industry  engaged 
in  raising  and  transporting  the  cotton,  and  what  we  re- 
ceive in  exchange  for  it,  must  be  either  partially  or 
wholly  thrown  out  of  employment.  Every  one  nuist 
see,  that  the  manufactures  of  England  could  be  afforded 
much  lower      that  is,   would  be  able  much   better   to 


PROTiiCTfNu    DUTIES.  139 

compete  with  those  of  other  nations,  if,  by  abolishing 
her  duties  on  com,  her  manufactures  could  be  suppHed 
with  the  necessaries  of  life  at  half  the  present  cost.  At 
tlie  same  profit  to  the  laborer  and  capitalist,  her  prod- 
ucts could  be  afforded  at  a  price  less  than  at  present, 
by  the  whole  amount  of  the  difference  in  the  expenses 
«)f  living.  By  this  difference,  she  would  both  undersell 
other  nations  and  increase  the  demand  for  her  manufac- 
tures, thus  reaping,  at  once,  a  double  advantage. 

But  once  more  :  It  is  seen  that,  by  such  a  system, 
the  course  of  industry  and  of  capital  in  a  nation,  must 
be  greatly  changed.  Thus,  when  an  article  is  imported, 
one  class  of  producers  must  labor  to  create  the  article 
which  we  exchange  for  it ;  another  class  must  build 
ships  to  transport  it ;  and  another  class  must  carry  on 
the  transportation.  By  a  discriminating  duty,  all  these 
classes  must,  either  in  whole  or  in  part,  be  thrown  out 
of  employment,  and  this  capital  be  either  reduced  in 
value,  or  rendered  wholly  useless.  Now  this  is  an  in- 
jury, both  to  the  capitalist  and  the  laborer.  The  prop- 
erty of  the  one  and  the  skill  of  the  other  are  rendered 
useless,  and  by  so  much  is  it  a  total  loss  to  the  country. 
It  may  be  said,  let  them  seek  other  employments. 
True  ;  they  must  do  this  ;  but  this  renders  it  not  the  less 
true,  that  there  has  been  so  much  loss.  If  a  man's 
house  be  burned  down,  it  is  easy  to  say  to  him,  move 
into  another  house  ;  but  this  does  not  alter  the  fact,  that 
his  house  has  been  burned  down,  and  that  he  has  suf- 
fered loss  to  precisely  this  amount. 

But,  suppose  he  turn  to  the  other  employment.  It 
has  been  shown  that  the  average  of  profit,  in  this  em- 
|)Ioyment,  cannot  be  higher  than  the  average  of  profit 
was,  in  the  employment  which  he  left.  He  is  then  no 
better  off  than  he  was  before,  and,  in  the  meantime,  he 
has  lost  the  skill  and  capital  which  he  spent  many  years 
to  acquire  ;  and  he  has  lost  them,  not  as  in  the  case 
mentioned  p.  97,  by  the  progress  of  civilization,  and 
with  the  prospect  of  bettering  his  condition,  but  by  an 
RCt  of  arbitrary  legislation.  By  all  this  amount  of  de- 
preciation, therefore,  is  he  and  of  course,  the  whole 
country,  poorer  by  the  change. 


140  BOt.NTIES. 

OJ  Bounties.  The  principle  of  bounties  is  the  same 
as  thai  of  discriminating  duties.  The  manner  in  which 
they  are  bestowed,  is  the  following  :  If  a  manufacturer 
cannot  produce  cloth  for  less  than  ten  dollars  a  yard,  and 
the  imported  clotli  can  be  produced  at  five  dollars,  a 
bounty  of  five  dollars  a  yard  is  given  him,  for  every 
yard  he  manufactures,  or  for  every  yard  he  exports. 
The  cloth,  then,  is  sold,  either  at  home  or  abroad,  at 
five  dollars,  and  ho  also  receives  five  dollars  as  a  gra- 
tuity. 

The  principal  reasons  urged  above,  apply  to  boun- 
ties. They  are,  however,  less  objectionable,  for  several 
reasons  : 

1.  The  price  of  the  article  is  not  visibly  raised,  and 
the  consumption,  therefore,  on  this  account,  is  not  so 
much  diminished. 

2.  The  encouragement  given,  in  this  manner,  is 
cheaper  ;  that  is,  we  pay  only  for  what  is  made,  while, 
by  discriminating  duties,  we  pay  the  same,  whether  any 
thing  be  made  or  not.  We  pay  a  very  heavy  duty  on 
cutlery  in  this  country,  while  not  a  thousandth  part  of 
the  cutlery  used.,  is  made  here.  It  would  be  vastly 
cheaper  to  pay  a  bounty  sufficient  to  raise  all  the  cutlery 
made  in  this  country  to  its  present  prices,  and  it  would 
be,  for  aught  I  see,  just  as  good  for  the  cuder.  The 
whole  effect  of  this  mode  of  encouragement  is,  to  pay 
one  man  as  much  more  as  the  bounty  amounts  to,  for 
producing  an  article,  than  we  should  pay  another  man  ' 
that  is,  one  man  will  do  it  for  five  dollars,  and  we  en- 
gage another  to  do  it  for  five  dollars,  and  give  him  five 
dollars  besides,  for  the  sake  of  economy. 

I  have,  thus  far,  considered  this  subject  solely  in  le- 
spect  to  its  connexion  with  economy  ;  that  is,  as  it  is 
favorable  or  unfavorable  to  production.  It  is,  however, 
obvious,  that  an  entirely  distinct  argument  might  be  con- 
structed on  another,  that  is,  a  moral  ground.  It  might 
be  asked,  by  what  right  does  society  thus  interfere  with 
the  property  of  the  individual  ?  when  did  the  individual 
surrender  this  right  .''  and  how  wise  would  it  be  for  him 
to  surrender  it .''     It  is  in  vain  here  to  urge,  that  society 


OBJECTIONS    -CONSIDERED.  141 

has  the  right  to  destroy  individual  property,  in  cases  of 
extienie  necessity  ;  because,  in  order  to  render  this  plea 
available,  it  must  be  shown  that  this  is  a  case  of  extreme 
necessity.  And  besides,  if  society  destroy  individual 
property  in  case  of  extreme  necessity,  it  is  always  bound 
to  make  good  the  loss  to  the  individual.  I  think  that, 
if  the  protected  interests  were  obhged  to  make  good  the 
loss  which  the  system  inflicts  upon  all  other  interests, 
the  demand  for  protection  would  be  less  urgent  than  at 
present  ;  and  protection  would  be  considerably  less  in- 
jurious. 

But,  as  these  are  questions  of  right,  and  belong  rather 
to  Moral  Philosophy  than  to  Political  Economy,  we 
shall  not,  in  this  place,  discuss  them  any  further- 
But,  in  opposition  to  what  has  been  offered,  several 
objections  have  been  urged.  It  may  be  proper  to  notice 
here,  some  of  those  which  are  most  commoqly  ad- 
vanced. 

I.  The  above  argument  is  made  to  turn  upon  produc- 
tion alone,  and  proceeds  upon  the  supposition,  that  the 
prosperity  of  a  nation  depends  upon  the  productiveness 
of  its  industry,  more  than  upon  any  thing  else.  In  or- 
der to  meet  this  view  of  the  case,  it  has  been  said,  that 
production  is  a  matter  of  no  consequence  to  a  nation's 
prosperity,  and  that,  in  order  to  make  a  nation  rich, 
liappy,  and  powerful,  all  that  is  necessary  is,  to  encour- 
age and  stimulate  consumption. 

1.  To  this  it  may  be  answered,  that  this  assertion 
leaves  the  above  argument  untouched,  so  far  as  produc- 
tion is  concerned  ;  that  is,  it  does  not  deny  that  the  ef 
fects  of  discriminating  duties  upon  production,  are  such 
as  we  have  shown. 

2.  But  secondly  :  If  a  man  assert  that  the  wealth  of 
a  nation  is  the  result  of  its  consumption,  and  not  of  its 
production,  he  must  also  assert  that  the  hand  of  the 
prodigal,  and  not  that  of  the  diligent,  maketh  rich  ; 
that  industry  and  frugahty  are  the  sources  not  of  wealth, 
but  o(  poverty  ;  that  fire  and  sword,  devastation  and 
murder,  are  national  blessings  ;  that  we  ought  to  pay 
other  natioi.s.  instead  of  their  jjaying  us,  for   spoliation** 


142  OBJECTIONS    CONSIDERED. 

of  property  ;  that  incendiaries  should  be  rewarded,  in- 
stead of  being  hanged  ;  and  that  the  way  to  render  a^iy 
rich,  happy,  and  prosperous,  is  to  reduce  it  to  ashes. 
If  a  man  really  believe  this  ;  1  do  not  say  if  he  assert 
it ;  his  case  is  beyond  the  reach  of  ratiocination. 

II.  It  has  also  been  urged,  that  the  only  method  of 
rendering  products  cheap,  is  to  encourage  competition  ; 
that  competition  is  the  great  source  of  increased  produc- 
tiveness of  labor,  and  that  to  excite  competition  among 
our  own  manufacturers,  by  means  of  higher  duties,  is  the 
only  sure  method  by  which  to  cause  any  article  of  ne- 
cessity to  be  produced  at  the  l-^west  possible  rate. 

To  this  objection  we  reply,  that  the  principle  assum- 
ed is  erroneous  ;  and  that  the  reasoning  in  support  of  it 
is  self-destructive. 

1.  The  principle  assumed  is  erroneous.  Although 
free  competition  is  necessary,  to  reduce  prices  to  their 
natural  rate  ;  yet  beyond  this,  competition,  within  long 
periods,  can  have  no  effect  whatever.  -  The  price  of 
every  article  is  determined  by  the  cost  of  its  production  ; 
f.hat  is,  by  the  labor  and  capital  necessary  to  produce  it. 
Its  price  can  be  reduced  in  no  other  manner  than  by 
reducing  this  cost.  If  the  materials  can  be  furnished 
cheaper,  and  it  can  be  produced  by  less  labor,  its  price 
will  fall  ;  but  it  can  fall  froni  no  other  cause.  If  it  be  a 
monopolized  article,  the  producer  may,  over  and  above 
a  fair  remuneration  for  his  expenses,  demand  an  exces- 
sive profit.  If  there  be  a  free  competition,  his  profits 
will  be  reduced  to  the  general  average  of  other  capital 
and  labor.  A  competition  which  obliged  a  producer  to 
sell  for  less  than  cost,  would  of  course,  ruin  him,  and 
would  be  a  loss  to  the  community.  Such  is  the  case  in 
times  of  manufacturing  depression,  when  the  producer 
IS  obliged  to  sell  at  a  loss.  These  are  surely  not  times 
of  prosperity.  The  result  of  such  competition  is,  to 
drive  a  portion  of  the  produ&ers  out  of  employment  ; 
a  less  amount  of  the  product  is  created^  competition  is 
diminished,  prices  rise  to  their  natural  level,  and  the 
whole  effect  of  competition  is  at  an  end.  If,  then, 
when  there  is  no  monopoly,  competition,  be   it  ever  so 


OBJEOriONS    CONSIDERED  143 

great,  can  reduce  ihe  price  of  no  ariicle  permanently 
below  the  cost  of  its  production  :  and  that,  by  this  cost 
its  price  will  always  be  determined,  be  the  competition 
whatever  it  may  ;  it  is  evident,  that  the  only  way  in 
which  the  price  of  any  thing  can  be  really  reduced, 
must  be  by  diminishing  the  price  of  the  material  and  la- 
bor employed  in  creating  it ;  that  is,  by  rendering  every 
thing  as  cheap  as  possible.  And  it  is  also  evident,  ihal 
by  raising  the  price  of  articles  of  consumption  ;  that  isj 
of  the  articles  of  living,  we  shall  also  raise  the  price  of 
whatever  is  produced,  let  the  competition  be  ever  so 
great. 

But,  secondly,  the  argument  drawn  from  the  assertion 
is  self-destructive.  If  it  be  the  fact  that  competition  is 
the  great  and  proper  cause  of  reduction  of  price,  then, 
the  wider  the  competition,  the  greater  will  be  the  reduc- 
tion of  price.  If  this  be  so,  we  should  not  only  open 
our  ports  to  every  other  nation,  but  should  abolish  im- 
port duties  altogether,  even  for  the  sake  of  raising  a  rev- 
enue, and  sustain  the  expenses  of  civil  government  al- 
together by  direct  taxation.  It  would,  however,  be  a 
new  mode  of  encouraging  competition,  if  the  citizens  of 
New  York  should  forbid  every  one,  not  a  native  of  that 
city,  to  exercise  the  trade  of  a  carpenter  or  joiner, 
within  the  limits  of  their  jurisdiction.  In  what  manner 
/Such  an  act  would  reduce  the  prices  of  house-building,  I 
confess  myself  unable  to  discover. 

I  think,  therefore,  that  the  system  of  discriminating 
duties  cannot  be  defended  on  the  ground  that  they,  b) 
competition,  tend  to  reduce  prices. 

III.  Again  :  It  is  asked,  is  it  not  better  to  laboi  foi 
ourselves,  than  to  have  others  labor  for  us  ? 

I  answer,  undoubtedly.  We  must  labor  for  our- 
selves, tuiless  we  mean  to  live  either  by  begging  or  Uy 
stealing.  And  this  is  really  the  only  alternative  which 
the  Creator  has  left  us.  On  this  point,  therefore,  there 
is  no  dispute.  It  is  agreed  on  both  hands,  that  it  is  better 
to  labor  for  ourselves,  than  to  have  others  to  labor  for  us 

Whatever  either  a  man  or  a  nation  possesses,  except 
by  robbery  or  begging,   must  be   the   pioduction   of  its 


144  OBJECTIONS    CONSIDERED. 

own  labor.  The  question  then,  is,  whether  it  is  bettei 
for  us  to  receive  a  greater,  or  to  receive  a  less  result 
from  our  labor.  Every  man  must  labor  for  a  coat. 
But  is  it  better  for. him  to  procure  it  by  labor,  for  five 
dollars  a  yard,  or  for  ten  dollars  ?  Is  it  better  that  he 
should,  by  exchange,  earn  it  by  five  days'  labor,  or 
make  it  for  himself,  by  fifteen  days'  labor  ?  He  pro- 
cures it  as  much  by  labor  in  the  one  case,  as  in  the  oth- 
er. I  do  not  see  that  there  can  be  any  question,  in 
which  way  his  labor  can  be  most  profitably  expended. 
If  a  manufacturer  wish  for  oranges,  he  can  procure 
them  m  no  other  way  than  by  labor.  The  question  is, 
whether  he  shall  procure  them  by  lal»r  in  manufactures, 
or  by  labor  in  raising  them.  In  the  first  case,  a  day's 
labor  will  produce,  by  exchange,  a  hundred  oranges  ; 
in  the  secohd  case,  it  will  cost  several  days'  labor  tc 
produce  one.  The  question  is,  in  which  way,  by  la- 
bor, can  a  manufacturer,  most  easily,  supply  himself 
with  oranges  .'' 

Upon  this  point,  really  hinges  the  whole  matter  in  dis- 
pute. It  is  clear,  as  has  been  stated,  that  every  thing 
which  we  possess,  either  as  nations  or  as  individuals, 
must  be  the  result  of  labor.  It  is  granted,  however,  in 
every  other  case  but  this,  that  the  greater  the  amount  of 
product  which  we  can  create  by  a  given  amount  of  la- 
bor, the  better  it  is  for  the  producer.  Suppose  the  labor 
of  a  particular  community  to  be  valued  at  a  million  of 
days'  works  annually,  it  is  certainly  wise  in  this  commu- 
nity to  procure,  by  this  amount  of  labor,  as  large  an 
amount  of  product  as  it  can.  Suppose,  that  by  laboring 
in  those  modes  of  production  for  which  it  has  the  great- 
est facilities,  and  then  by  exchanging  a  part  of  its  prod- 
ucts for  those  of  another  country,  it  can  reahze  two 
millions  of  dollars'  worth  of  products  ;  but,  by  producing 
every  thing  for  itself,  it  can  only  reahze  a  million  and  a 
half  dollars'  worth.  In  which  case,  I  ask,  is  labor  more 
amply  rewarded  ?  Which  is  the  wiser  method  of  appor- 
tioning its  labor  .-*  In  which  way  will  capital  accumulate 
most  rapidly,  and  the  nation  soonest  be  capable  of  man- 
L**acturing  profitably  for  itself  .-' 


OBJECTIONS    CONSIDERED.  146 

TV.  But  it  is  said,  although  we  may  be  obliged,  ai 
first,  to  procure  manufactures  at  a  higher  price,  yet, 
having  once  introduced  them,  they  will,  in  the  end,  be- 
come cheaper  than  before  ;  and  thus,  our  ultimate  ben- 
efit will  more  than  repay  our  temporary  loss. 

In  order  to  consider  this  objection,  it  will  be  necessa- 
ry to  refer  to  what  we  have  already  remarked  on  the 
nature  of  annual  and  fixed  capital. 

It  is  evident,  that,  in  the  first  stage  of  any  society, 
'here  exists  nothing  but  the  earth  with  its  capabilitie?, 
and  man  to  labor  upon  it.  The  labor  of  man  produces 
an  annual  capital.  If  he  have  been  industrious  and  fru- 
gal, there  will  have  arisen  an  annual  surplus,  which  must, 
of  necessity,  be  transformed  into  fixed  capital  ;  and  it  is 
so  transforn^ed,  for  the  purpose  of  increasing  the  annual 
capital.  Thus,  every  addition  to  the  fixed  capital  for 
this  year,  lays  the  foundation  for  the  investment  of  a 
larger  amount  in  fixed  capital  for  the  next  year  ;  and 
thus  nations  grow  rich,  and  the  demand  for  fixed  capital 
is  annually  increasing. 

It  is  evident  that  the  investment  in  fixed  capital  will 
be,  first,  in  those  instruments  themselves,  necessary  for 
the  direct  increase  of  annual  production,  as  ploughs, 
fences,  houses,  barns,  &c. ,  and,  secondly,  in  the  ma 
chinery  necessary  to  the  creation  of  these,  and  of  the 
productions  for  annual  consumption  ;  that  is,  it  will  be 
in  manufacturing  establishments.  But,  inasmuch  as  the 
capital  of  a  country  is  at  first  small,  a  nation  will,  of 
necessity,  at  first  invest  its  annual  surplus  in  those  man- 
ufactures which  require  the  least  capital,  and  of  which 
ihr  price  is  most  enhanced  by  transj)ortation.  As  capi- 
tal increased,  it  would  become  able  to  make  larger  in- 
restments  of  fixed  capital.  Manufactures,  which  it 
would  have  been  impossible  for  it  to  conduct  profitably 
in  its  tenth  year,  it  may  conduct  profitably  in  its  fifti- 
eth year ;  and  what  it  could  not  conduct  profitably  in 
its  fiftieth  year,  it  may  very  profitably  conduct  in  its 
one  hundredth  year.  And  the  reason  of  this  variation 
IS  two-fold.  In  the  one  case,  it  did  not,  and  in  the 
other  case  it  did,  possess  the  capital  necessary  for  the 
13 


146  OnJECTIONS    CONSIDKRED. 

investment  in  this  particular  branch  of  manufar«ure.s  , 
and,  in  tiie  secoutl  place,  i  hough  it  possessed  the  requi- 
site copita!,  that  capital  could  not  be  taken  from  the  em- 
ployments in  which  it  was  at  present  engaged,  and  in- 
vested in  any  thing  else,  without  a  loss,  that  is,  a  dimi- 
nution of  profit.  As  soon,  however,  as  the  most  neces- 
sary investments  have  been  made,  their  annual  product 
ivill  enable  the  nation  to  commence  something  else;.  Hy. 
the  multiplication  of  capital,  the  rate  of  interest  is  di- 
miin'shed  and  a  nation  is  gradually  enabled  to  produce 
for  itself  every  thing  for  which  it  has  the  natural  facili- 
ties. And  hence,  the  time  when  any  manufacture  can  be 
profitably  established,  in  a  country  which  possesses  nat- 
ural advantages  for  it,  is  decided  by  the  amount  of  the 
capital  of  that  country  ;  the  amount  of  agnual  invest- 
ment which  it  is  able  to  make  in  fixed  capital  ;  and  on 
the  rate  of  interest  at  the  period  in  question. 

Now,  suppose  that  the  system  of  discriminating  duties 
left  the  means  of  accumulation  unaffected.  In  this  case, 
the  period  of  profitably  producing  the  article  in  question 
would  arive,  at  the  same  time  as  if  no  such  system  had 
been  adopted.  Previously,  therefore,  to  this  time,  the 
article  must  have  been  purchased  by  the  whole  commu- 
nity, at  an  additional  and  unnecessary  expense  ;  since, 
when  this  time  arrived,  in  the  natural  course  of  things, 
the  manufacture  in  question  would  commence,  just  as 
though  nothing  had  been  done,  and  just  as  every  other 
manufacture  had  previously  commenced.  In  this  case, 
then,  I  see  not  that  there  would  be  any  gain.  All  that 
has  been  paid,  therefore,  is  so  much  unnecessary  ex- 
pense, without  rendering  this  kind  of  investment  profit  • 
able  to  the  whole  community,  any  sooner  than  it  would 
have  been,  had  no  such  expense  been  incurred. 

That,  however,  a  discriminating  duty  does  not  in 
crease  productiveness,  that  is,  the  means  of  accumula- 
tion, but  that,  on  the  contrary,  it  diminishes  it,  ha?,  1 
tiiink,  been  already  shown.  Now,  by  just  so  much  as 
it  diminishes  productiveness,  and  of  course  diminishes 
annual  capital,  by  so  much  it  postpones  the  period,  a! 
which  the  manufacture  in  question  can  be  profitably  es 


OBJECTIONS    CONSIDERED.  147 

tablished.  Hence,  the  state  of  the  case  is  this  :  In  the 
present  condition  of  capital  and  labor,  the  manufacture 
of  a  particular  produce  is  unprofitable.  In  order  to 
produce  it  now^  instead  of  producing  it  at  a  later  period, 
wo  diminish  the  productiveness  of  all  other  labor.  And 
liu;  only  effect  of  this  imposition  which  we  have  laid 
upon  ourselves,  is,  instead  of  hastening  the  period  of  its 
.  profitable  establishment,  to  postpone  it  to  a  still  more 
distant  period. 

But  this  is  not  all.  We  see  that  all  this  is  done,  and 
all  this  expenditure  is  incurred,  without  any  certain 
knowledge  of  the  result.  It  cahnot  be  certainly  known 
when  the  period  will  arrive,  at  which  the  manufacture, 
in  favor  of  which  we  have  laid  the  discriminating  duty, 
^may  be  profitably  commenced,  or  whether,  indeed,  it 
can  ever  be  commenced  at  all.  If  it  can  never  be 
commenced,  we  have  thus  imposed  a  duty  by  which  we 
are  all  made  so  much  the  poorer,  without  the  prospect 
of  any  benefit.  And  if  it  may  profitably  be  established 
at  some  future  time,  but  we  know  not  when  that  time 
will  arrive,  we  are  paying  out  our  money  at  random  ; 
that  is,  we  know  not  whether  we  shall  gain  or  lose  by 
the  exchange.  Supposing  a  benefit  in  fact  to  result,  it 
is  worth  a  given  sum,  and  no  more  ;  but  we  have  no 
means  of  knowing  whether  the  sum  which  we  pay  is 
only  equal  to  the  benefit,  or  whether  it  is  ten  times 
greater.  Now,  that  it  is  very  possible  for  a  nation  tlius 
to  pay  for  an  advantage,  supposing  an  advantage  to  be 
gained,  vastly  more  than  it  is  worth,  is  manifest. 

To  illustrate  the  amount  which  has  been  frequently 
expended  to  gain  this  supposed  advantage,  I  subjoin  the 
following  instances  from  tlie  Edinburgh  Review,  for  Oc- 
lober    1829: 

"  The  French  duties  on  iron,  from  1814  to  1822, 
I)ave  directed  much  capital  to  the  non  trade.  In  1818, 
1,140,000  quintals  of  unwrought  iron  were  produced  in 
Fraire;  in  182.5,  1,976,000;  in  1829.  2,269,000. 
Thus  far  the  system  has  succeeded. 

On  the  contrary,  as  foreign  iron  is  imported  at  a 
duty  averaging  twenty  francs,  the  price  of  the  whole 


lis  OBJECTIONS    COXSIDKRED. 

2,269,000,  above  what  it  could  have  been  imported  for, 
is,  40,538,800  francs,  the  direct  cost  for  protection. 
This  is  about  £  20  sterling  a-piece  to  every  person  en- 
g,aged  in  the  iron  trade.  The  effect  of  tiiese  measures 
is,  to  add  fifty  francs  to  the  price  of  a  plough,  and  to 
render  cotton  machinery  one  third  dearer  than  it  vvoulti 
be  if  imported.  The  price  of  charcoal  has  been  doubled 
or  trebled,  and  from  twenty-five  to  fifty  per  cent,  has 
been  added  to  the  price  of  iron  and  wood.  So  great  is 
the  injury  to  other  branches  of  production. 

And  yet  the  iron  trade  is  depressed.  This  is  owing  to 
(he  fact,  that  too  great  a  portion  of  capital  has  been  di- 
rected to  the  iron  trade  ;  and  also  to  the  increased  price 
of  charcoal.  It  must  also  necessarily  follow,  from  what 
has  been  said  above,  that  this  pressure,  which  has  been 
brought  upon  other  branches  of  production,  must  reduce 
the  average  ratio  of  profit  ;  and  to  this  average  the  iron 
trade  must  sink,  as  well  as  every  thing  else.  Here  there 
is  an  injury  done  to  every  other  branch  of  business,  and 
yet  the  iron  business  is  not  at  the  average  rate  of  profit ; 
that  is,  it  is  depressed.  There  is  a  great  annual  loss ;  but 
where  do  we  see  the  prospect  of  a  subsequent  benefit .'' 

Tlie  sugar  trade.  To  encourage  her  colonies,  France 
lays  a  duty  of  fifty  francs  per  quintal,  on  all  foreign 
sugars.  This  has  increased  the  quantity  made  at  home 
and  at  her  islands.     So  far  it  has  succeeded  ;  but, 

2.  The  difference  between  the  duty  on  foreign  and 
the  duty  on  her  own  sugars,  amounts  to  32,945,000 
francs.  This  is  the  bounty  paid  to  the  sugar  growers 
t)f  Martinique  and  at  home. 

3.  The  quantity  of  sugar  consumed  is  probably  less 
by  one  third,  than  it  would  otherwise  be.  England, 
with  half  the  number  of  inhabitants,  consumes  two  and 
a  half  times  as  much  sugar  as  France. 

4  But  it  is  said,  that,  by  this  means,  beet-root  sugai 
will  yet  supply  France  at  the  ordinary  price.  It  must, 
however,  take  twenty  years,  under  the  present  system, 
in  order  to  do  this.  The  present  protection  cosl.« 
£  1,400,000  per  annum.  Suppose  this  to  continue  for 
twenty  years,  it  will  amount  to  JC  28,000,000  sterling/ 


OBJECTIONS    CONSIDERED.  149 

the  interest  of  which,  at  five  per  cent.,  will  buy,  at  two 
tnd  a  half  pence  per  pound,  126,000,000  pounds  of 
sugar  per  annum  ;  or  nearly  the  whole  annual  amount 
of  sugar  now  consumed  in  France. 

The  Cotton  Manufacture.  By  pushing  forward  tliose 
products  for  which  she  has  no  capabilities,  she  has  di- 
minished those  to  which  she  is  adapted.  Countries 
which  formerly  bought  of  her,  now  that  she  refuses  to 
receive  their  products,  refuse  to  receive  hers.  Hence, 
the  exports  of  wine,  her  natural  product,  have  fallen  off. 

Before  the  Revolution,  her  export  of  wine  averaged 
100,000  tons  per  annum.  Since  1820,  it  has  varied 
from  39,000  to  63,000  tons.  The  result  upon  her  silk 
trade  has  been  the  same.  She  has  obliged  other  na- 
tions to  raise  silk  for  themselves."  * 

Such  are  some  of  the  certain  evils  of  such  a  system. 
These  surely  ought  not  to  be  voluntarily  imposed  upon 
*  ourselves,  without  equal  certainty  of  future  benefit,  and 
a  benefit  so  much  superior  to  that  which  we  should  oth- 
erwise have  reaped,  as  to  compensate  us  for  all  the  evils 
and  expenses  which  we  impose  upon  ourselves.  And 
if  it  do  no  more  than  this,  we  are  the  losers,  by  all  the 
cost  of  the  agency  for  doing  that  which  would  as  well 
have  been  done  without  us.  But,  if  the  system  itself . 
do  nothing  towards  hastening  the  time  of  profitable  in- 
vestment in  manufactures,  then  it  is  an  immediate  and  a 
very  great  and  wide-spreading  evil  at  present,  and  it 
tends  to  nothing  but  evil  for  the  future. 

V.  It  is  said,  that  it  is  frequently  expedient  to  impose 
a  duty  as  a  measure  of  retaliation.  The  case  is  this. 
A  nation  will  not  receive  our  products,  and  we,  in  order 
to  punish  her,  and  thus  oblige  her  to  change  her  polic), 
refuse  to  receive  hers.  Let  us  proceed  dispassionately, 
but  briefly,  to  consider  this  argument. 

1.   Is  retahation  a  virtuoBs  or  an  honorable  motive  to 
action  .'     Do  we  not  consider  it  vicious  and  mean  in  an 
individual  ?  Can  it  be  otherwise  in  a  nation  ?  The  pre 
(umption  must  surely  be  adverse  to  a  course  of  conduct, 

*  1  have  marked  the  above  passage  as  a  qaotation,  although  I  have 
■bridged  llie  extract,  without  giving  the  exact  wards 

13* 


<50  OBJECTIONS    COISMDERED. 

which  is  a  manifest  departure  iVom  elevated  moral  prin 
ciple. 

2.  Is  retaliation,  in  the  intercourse  between  man  and 
man,  generally  wise  ?  Do  we  not  commonly  ODserve, 
that  it  leads  men  to  headlong  vindictiveness,  which  is  as 
likely  to  injure  themselves  as  their  opponent  ? 

3.  Our  object  is  to  distress  the  other  country  until  we 
ablige  her  to  alter  her  policy  and  receive  our  products. 
But  will  this  appeal  to  her  fears  be  as  likely  to  produce 
the  change  which  we  desire  as  setting  her  the  example 
of  manly  generosity  ?  Of  all  means  that  can  be  con- 
ceived, a  threat  is  the  least  likely  to  produce  effect  upon 
large  masses  of  men. 

4.  But  if  we  resolve  to  injure  our  neighbor,  let  us 
see  that  we  do  not  too  much  injure  ourselves,  and  thus 
render  her  enmity  still  more  effective. 

She  refuses  our  products,  and  we  retaliate  by  refusing 
hers.  Now  we  can,  by  exchange  with  other  nations, 
procure  her  products  at  a  cheaper  rate  than  we  can 
manufacture  them  ourselves,  or  we  cannot.  If  we  can- 
not^ then  a  duty  is  unnecessary,  since  we  shall,  in  that 
case,  of  course,  produce  them  ourselves.  If,  in  conse- 
quence of  the  obstacles  which  Great  Britain  opposed  to 
the  reception  of  our  raw  material,  her  cottons  were 
raised  in  price  as  high  as  those  manufactured  here,  we 
should  exclude  thein  immediately  by  our  own  products. 
If,  on  the  other  hand,  by  means  of  a  double  exchange, 
we  can  procure  them  cheaper  than  we  could  procure 
them  in  any  other  manner,  it  would  be  for  our  interest 
thus  to  procure  them.  Because  another  nation  wishes 
to  injure  us,  there  is  no  reason  why  we  should  injure  our- 
selves. We  surely  injure  ourselves  when  we  pay  a 
dollar  for  an  article  when  we  could  get  it  just  as  well  for 
se\  enty-five  cents. 

A.nd  besides,  it  is  said,  w^wish  to  become  indepen- 
dent of  the  other  nation.  True  ;  but  how  shall  we  be- 
come independent  of  her.  Clearly  by  becoming  wealthy 
and  powerful.  But  the  way  to  wealth  and  power  is, 
surely,  to  buy  uhere  we  can  buy  on  the  best  terms,  and 
sell  where  we  can  sell  on  the  best  terms.     We  thus 


OBJECTIONS    CONSIDERED.  151 

shall  the  most  rapidly  accumulate  wealth,  and  increase 
our  population,  and  thus  most  readily  shall  we  be  able 
to  compete  with  the  manufactures  of  any  other  nation. 
The  question,  then,  seems  to  be  simply  this.  Shall  we 
diminish  our  own  happiness  for  the  sake  of  dimhiishing 
the  happiness  of  another  .''  or  shall  we,  deaf  to  the  insti- 
gations of  vindictiveness,  and  irrespective  of  the  effect 
upon  others;  promote  our  own  happiness  by  every  means 
iu  our  power  .''  Or  still  further,  if  we  resolve  to  punish 
our  neighbor,  would  it  not  be  worth  while  to  ask  what 
it  will  cost ;  and  whether  we  are  wilHng,  for  the  sake  of 
retaliation,  to  pay  several  millions  of  dollars  annually. 

To  all  this,  it  is,  finally,  objected,  that  a  government 
having  adopted  a  restrictive  system,  and  having  thus 
obliged  persons  formerly  engaged  in  other  branches  of 
industry  to  embark  in  manufactures,  is  under  moral  obli- 
gation to  continue  that  protection  ;  at  least  so  long  as  to 
enable  the  manufacturer  to  change  his  mode  of  employ- 
ment without  injury.  To  this  objection  I  have  no  de- 
sire to  make  any  reply.  It  is  a  question  of  morals,  and 
not  of  political  economy.  Whatever  the  government 
has  directly  or  indirectly  pledged  itself  to  do,  it  is  bound 
to  do.  But  this  has  nothing  to  do  with  the  question  of 
the  expediency,  or  inexpediency,  of  its  having,  in  the 
first  instance,  thus  bound  itself;  nor  with  the  question 
whether  it  be  not  expedient  to  change  its  system  as  fast 
as  it  may  be  able  to  do  so,  consistently  with  its  moral 
obligations. 

For  these  reasons,  I  do  not  believe  that  the  direct 
efforts  of  government  are  to  be  numbered  among  the 
means  for  encouraging  the  application  of  labor  to  capita! 
Their  good  effect,  if  it  exist,  must,  therefore,  be  soiighl 
for,  not  in  their  effect  upon  production,  but  u[>on  sonie* 
tiling  else. 

Rut  it  may  be  asked,  can  a  government  do  nothing  to 
promote  the  industry  of  a  people,  and  to  increase  the 
amount  of  their  production  }  I  answer  ;  they  can  do  much. 

1.  They  can  enact  wise,  wholesome,  and  equitable 
laws,  and  thus  protect  the  individual  in  the  exercise  of 
his  right  cf  person  and  property. 


152  OBJECTIONS    CONSIDERED. 

2.  They  can  do  much  lo  accomplish  the  universal 
diffusion  of  the  means  of  knowledge,  by  the  promotion 
of  education  among  all  classes  of  the  people. 

3.  They  can  do  much  for  the  promotion  and  exten- 
sion of  science,  by  fostering  seminaries  of  learning. 

4.  They  can  originate  that  knowledge,  which  must 
otherwise  be  obtained  at  great  individual  expense.     As, 

1 .  By  experimental  farms,  of  which  the  results  should 
be  accurately  registered,  and  published  to  the  whole 
community. 

2.  By  experimen,ta]  manufactures,  which  might  show, 
from  time  to  time,  what  branches  of  manufacture  could 
profitably  be  introduced  into  a  country,  and  how  they 
might  be  most  successfully  conducted. 

.  In  this  manner,  much  might  be  done,  and  at  small  ex- 
pense. When  these  means  have  been  tried,  and  have 
failed,  it  will  be  time  enough  to  make  other  and  more 
expensive  experiments. 

5.  They  can  do  much,  by  confining  themselves  to 
their  own  appropriate  duties,  and  leaving  every  thing  else 
alone.  The  interference  of  society  with  the  concerns 
of  the  individual,  even  when  arising  from  the  most  inno- 
cent motives,  will  always  tend  to  crush  the  spirit  of  en- 
terprise, and  cripple  the  productive  energies  of  a  coun- 
try. What  shall  we  say,  then,  when  the  capital  and  the 
labor  of  a  nation  are  made  the  sport  of  party  politics  ; 
and  when  the  power  over  them,  which  a  government 
possesses,  is  abused,  for  the  base  purpose  of  ministering 
to  schemes  of  political  intrigue  ."' 

So  far  as  T  am  able  to  discover,  such  are  the  most 
important  conditions  on  which  the  productiveness  of  any 
society  depends.  They  are  briefly  these  :  Industry  and 
Frugality^  Virtue  and  Intelligence.  Possessed  of  these, 
no  nation,  with  the  ordinary  blessing  of  God,  can  long 
be  poor.  Destitute  of  either  of  them,  whatever  be  its 
natural  advantages,  no  nation  can  ever  long  be  rich. 
Patriotism,  no  less  than  religion,  would,  therefore,  teach 
as  to  cultivate  these  habits  in  ourselves  and  in  others  ; 
and  he  is  the  purest  patriot  who  cultivates  them  most 
assiduously 


BOOK  SECOND. 


EXCHANGE. 

Exchange,  is  a  transaction,  in  which  two  individu- 
als mutually  and  voluntarily  transfer  to  each  other  the 
right  of  property,  to  a  given  amount,  either  in  capital  or 
labor. 

This  transfer  must  be  both  mutual  and  voluntary  by 
both  parties,  or  else  it  is  robbery  by  one  party.  If 
property,  without  the  right  of  possession,  be  given  in 
exchange,  it  is  fraud.  If  I  give  a  horse  in  exchange, 
which  does  not  belong  to  me,  I  confer  no  right  of  prop- 
erty ;  for  1  have  none  to  confer  ;  since  the  real  owner 
may  reclaim  him,  at  any  moment.  The  exchange  may 
be  either  of  capital  by  both  parties,  as  if  A  and  B  ex- 
change wheat  for  corn  ;  or  of  capital  for  labor,  as  when 
\  gives  B  a  bushel  of  wheat  for  a  day's  labor  ;  or  of 
labor  for  labor,  as  when  A  agrees  to  work  for  B  to-day, 
on  condition  that  B  shall  work  for  him  to-morrow.  Ex- 
change is  of  three  kinds,  viz  : 

I.  Barter  in  general,  or  exchange  in  kind. 

II.  Exchange  by  means  of  a  metallic  currency. 
Ill    Exchange  by  means  of  a  paper  currency. 


CHAPTER  FIRST. 

or  BARTER  OR  EXCHANGE  IN  CIND. 

SECTION  I. 

OF  THE  PRINCIPLES   IN  THE    PRESENT   CONSTITUTION, 
WHICH    GIVE    RISE    TO    EXCHANGE. 

1.  It  has  been  already  shown,  that  human  labor,  of 
some  kind,  is  necessary  to  produc.^'on  ;  that  is,  to  the 
creation  of  whatever  has  the  powei  of  gratifying  human 
desire.  Hence,  without  labor,  no  desire  would  be  grat- 
ified ;  that  is,  the  race  would  speedily  perish.  As  we 
have  said  before,  the  law  of  our  being,  imposed  upon 
every  individual,  enacts  that,  by  the  sweat  of  our  face 
we  shall  eat  our  bread. 

2.  But  by  labor  exerted  upon  any  substance,  in  such 
nanner  as  to  give  it  value,  we  establish  over  that  value, 
either  in  whole  or  in  part,  the  right  of  property.  If  the 
original  capital  were  our  own,  we  possess  that  original 
capital,  together  with  all  the  additional  value,  which  the 
change  that  we  have  effected  has  created.  If,  by  labor 
upon  the  capital  of  another,  we  have  increased  its  value, 
we  establish  a  right  to  a  portion  of  it,  to  be  estimated 
by  the  respective  values  of  the  labor  and  capital  em- 
ployed. Nay,  this  capital  is  nothing  but  the  result  of 
pre-exerlcd  labor.  So  that  the  capitalist  contributes  his 
pasl^  and  ihe  laborer  his  present  labor,  and  they  shaie 
the  product  between  therfi. 

3.  Hence,  from  the  very  conditions  of  our  being,  the 
act  of  creating  a  value  appropriates  it. to  a  possessor 
This  holds  true  of  every  thing  not  the  spontaneous  gift 
of  God.  Hence,  every  thing  created  by  man,  belongs 
to  some  man  that  is,  he  possesses  over  it  the  right  of 
property.     And  this  right  of  property  is  exclusive  ;  that 


fRINCIPLES  WHICH  GIVE   RISE  TO   EXCHANGE.     I{>5 

is,  he  has  the  right  to  use  it  as  he  will,  to  the  exclusion 
of  every  man  and  of  all  men.     And,  provided  he   do 
not  interfere  with  the  rights  of  others,  no  man  can  inter 
fere  with  his  use  of  whatever  product  he   has  created, 
without  a  violation  of  moral  law. 

4.  Different  men  are  constituted  by  the  Creator  vviih 
diffeient  aptitudes  for  different  pursuits, .and  with  differ- 
ent dispositions  towards  those  pursuits.  One  man  is 
adapted  to  investigate,  and  another  to  apply  to  practice, 
the  laws  of  nature,  and  another  to  perform  the  operation 
by  which  those  laws  are  made  to  create  value.  And 
these  aptitudes  are  still  further  subdivided.  One  man  is 
better  adapted  to  investigate  physical,  another  intellec- 
tual, and  another  moral  laws.  Thus,  also,  in  the  various 
pursuits  of  operative  industry,  one  man  prefers  agricul- 
ture, another  manufactures,  and  another  navigation.  And 
it  is  found,  as  might  be  expected,  that  the  disposition 
towards  a  particular  operation,  severally  corresponds 
with  a  man's  aptitude  for  it  ;  that  is,  that,  in  general,  a 
man  is  most  strongly  disposed  to  devote  himself  to  that 
particular  occupation,  for  which  God  has  given  him  the 
greatest  aptitude.  Indeed,  the  disposition,  in  most  cases, 
will  do  very  much  to  create  the  aptitude.  A  man  al- 
ways labors  more  successfully  in  an  occupation  which  he 
likes,  than  in  one  which  he  dislikes. 

5.  Hence,  a  great  public,  as  well  as  private  advantage, 
arises  from  every  one's  devoting  himself  to  that  occu- 
pation which  he  prefers,  and  for  which  he  is  specially 
fitted.  Inasmuch  as  he  likes  it  best^  he  is  thus  happier 
than  he  would  be  in  the  pursuit  of  any  other.  Every 
one  thus  being  able  to  do  that  which  he  likes  best,  every 
one  will  derive  from  this  source,  all  the  happiness. which 
it  is  able  to  confer.  And,  inasmuch  as  he  is  better  fitted 
for  j^  he  will,  with  the  same  labor,  create  a  greater 
amount  of  value  than  he  will  by  labor  in  any  oilier  em- 
ployment. He  will  also  create  the  value  much  more 
perfectly.  The  annual  amount  of  value,  (Mealed  in  a 
com  nunity,  will  thus  be  greatly  increased,  wiih  the  same 
amount  of  labor,  and,  with  a  much  greater  amount  of 
happiness.     If  every  man  labored  at  that  employment  w 


156    PRINCIPLES  WHICH  GIVE  RISE  TO   EXCHANGE. 

which  he  could  create  an  amount  of  value  equal  to  twen- 
ty^ there  would  be,  by  the  whole  society,  just  twice  as 
much  created,  as  if,  by  changing  occupations,  each  one 
labored  at  that  for  which  he  could  create  a  value  equal 
only  to  ten.  If  all  the  different  classes  of  laborers  were, 
for  a  year,  to  be  obliged  to  exchange  work  with  each 
other,  every  one  can  perceive  that,  for  that  year,  pro- 
duction would  almost  absolutely  cease. 

6.  Were  this  all,  though  every  man  created  his  own 
particular  value  with  the  greatest  possible  success,  yet 
each  man  would,  manifestly,  possess  but  one  value.  The 
wheat  grower  would  have  nothing  but  granaries  full  of 
\>iheat ;  the  carpenter,  nothing  but  ranges  of  houses  ;  the 
stone  cutter,  nothing  but  piles  of  stone  ;  and  the  shoe- 
maker, nothing  but  thousands  of  shoes.  But  while  there 
exists  in  every  man,  both  the  aptitude  and  the  disposition 
for  the  creation  of  a  particular  value,  there  exists  equally 
in  every  man,  a  desire  to  enjoy  every  value  that  can  be 
created.  A  man  may  like  to  create  a  value  of  which  he 
desires  to  use  but  very  little  himself ;  nay,  for  which,  in 
itself,  he  perhaps  has  even  less  desire  than  most  other 
men.  The  man  who  is  the  fondest  of  fishing,  may  be, 
by  no  means,  a  great  lover  of  fish.  He  who  is  the  fond- 
est of  hunting,  may  be,  by  no  means,  the  fondest  of 
game.  No  man  supposes,  because  a  man  is  fond  of  fox- 
hunting, that  he  is  fond  of  fox-eating.  Thus,  we  see, 
that  the  desire  for  the  creation  of  value,  is  one  thing, 
and  the  desire  for  using  the  value  created,  is  another 
The  one  is  limited  to  single  objects,  and  the  other  is  as 
widely  extended  as  the  objects  to  which  it  can  be  direct- 
ed. And  it  is  evident,  that  the  one  form  of  desiie  is 
as  mi^ch  intended  to  be  gratified  as  the  other.  He  who 
created  the  desire,  and  also  created  the  object  which 
jwould  gratify  it,  intended  the  one  for  the  other,  restrict- 
mg  man  only  to  the  modes  and  degree  of  gratification 
which  he  has  appointed.  Civilization  and  social  happi- 
ness advance,  just  in  proportion  as  the  greatest  number 
of  the  desires  of  man  are  gratified,  in  conformity  with 
the  jav^s  of  the  Creator. 

7.  We  see,  then,  that  man  is  created  with  the  aptitude 


NATIONAL    EXCHANGE.  107 

and  the  desire  for  the  creation  of  one  product,  but  with 
the  desire  for  the  enjoyment  of  a  thousand  products,  and, 
that  the  gratification  of  one  of  these  forms  of  desire  is 
as  much  the  intention  of  his  Creator,  as  the  gratification 
of  the  other.  He  is  intended  to  produce  one  thing,  and 
to  hold  this  thing  produced,  by  the  right  of  property, 
wiiile  at  the  same  time,  every  man  is  intended  to  requue, 
Jor  the  gratification  of  his  desires,  a  thousand  things. 
Now,  it  is  the  existence  of  these  contrary  indications  in 
his  nature,  that  creates  the  necessity  for  exchange  'J'he 
right  to  use  his  product  as  he  pleases,  is  also  the  right  to 
transfer  it  to  whomsoever,  that  is,  to  exchange  it  vvith 
whomsoever  he  pleases,  and  for  whatever  he  pleases. 
By  doing  this,  all  the  indications  of  his  nature  are  ful- 
filled. The  right  of  property  is  preserved  inviolate. 
Every  one  may  employ  his  own  capital  and  industry  as 
he  pleases,  that  is,  as  will  best  promote  his  own  happi- 
ness, and  also  as  will  add  the  most  abundantly  to  the 
wealth  of  the  whole  community  ;  and,  at  the  same  time, 
by  means  of  the  products  of  his  single  branch  of  indus- 
try, he  may  procure  every  object  of  desire  that  every 
other  man  has  created.  And,  inasmuch,  as  by  division 
of  labor,  on  the  principle  of  which  we  have  spoken,  a 
larger  amount  will  be  created,  and  in  greater  perfection, 
he  will  procure  every  object  at  less  labor,  and  in  more 
perfect  condition,  than  would  be  possible  in  any  other 
manner. 

The  necessity  of  exchange,  therefore,  as  truly  enters 
into  the  conditions  of  our  being,  as  that  of  production. 
Without  exchange,  there  could  be  no  division  of  labor, 
and,  of  course,  only  the  smallest  possible  amount  of 
production.  Without  exchange,  there  would  rarely  be 
any  stimulus  to  labor  ;  for  labor  could  add  but  little  to 
our  means  of  gratification,  beyond  the  most  absolute  ne- 
cessaries of  life.  Tl»ere  would  be  no  stimulus  to  form 
societies,  since,  as  man  depended  solely  upon  himself, 
ho  might  as  well  be  solitary  as  social.  Hence,  all  pro- 
gress in  civilization  would  be  hopeless,  and  each  genera- 
tion would  tread  precisely  in  the  footsteps  of  that  which 
had  preceded  it. 
14 


!53  NATIONAL    EXCHANGE. 

8.  I  have,  thus  far,  spoken  merely  of  exchange  be- 
tween the  individuals  of  the  same  society.  I  think  it 
evident,  however,  that  the  same  principles  apply  with 
equal  force  to  the  exchanges  between  different  societies. 

The  aptitudes  of  different  nations  for  the  creation  of 
different  products,  has,  in  many  cases,  been  fixed  by 
jjnchangeable,  geographical,  and  physiological  law.  Cot- 
ton, coffee,  spices,  dye-stuffs,  sugar,  rice,  and  many  of 
the  most  valuable  fruits  and  medicines,  can  be  cultivated 
only  in  southern  latitudes.  Wool,  wheat,  and  broad- 
stuifs  generally,  flax,  and  the  most  valuable  animals,  are 
found  only  in  temperate  climates.  Iron  is  found  in  north- 
ern latitudes  ;  and  furs,  hemp,  and  feathers  are  brought 
from  climates  still  further  north.  One  country  is  better 
adapted  to  commerce,  another  to  agriculture,  and  another 
to  manufactures. 

Besides,  as  we  have  already  shown,  a  society,  at  one 
period  of  its  history,  is  better  adapted  to  one  sort  of 
production  than  to  another.  When  capital  is*  scarce  and 
land  is  cheap  and  fertile,  a  nation  is  better  adapted  to 
agriculture  ;  when  capital  becomes  abundant  and  land 
dear,  it  becomes  gradually  better  adapted  to  manufac- 
tures ;  that  is  to  say,  nations,  as  well  as  individuals,  both 
by  original  endowment  and  accidental  circumstances, 
have  their  special  adaptations  to  the  creation  of  particu- 
lar products.  I  suppose  it  unnecessary  to  state,  that 
nations,  that  is,  people,  if  left  to  themselves,  are  like 
in  Jividuals,  disposed  to  avail  themselves  of  the  peculiar 
advantages  bestowed  upon  them  by  their  Creator.  Self- 
interest  teaches  them  this  lesson  with  sufficient  clearness, 
and  they  willingly  practise  it,  if  left  to  their  own  natural 
instincts. 

It  is  also  evident  that,  by  each  nation's  devoting  itself 
to  that  branch  of  production  for  which  it  has  the  greatest 
facilities,  either  original  or  acquited,  its  own  happiness 
will  be  better  promoted,  and  a  greater  amount  of  pro- 
duction created,  than  in  any  other  manner.  And  while 
all  nations  thus  appropriate  their  industry,  a  much  greater 
amount  of  annual  value  will  be  created  for  the  whole 
human  race,  than  by  any  change  that  could  possibly  be 


NATIONAL    EXCHANGE.  1 59 

made.  If  Cuba  should  relinquish  the  raising  of  coffee 
and  sugar,  and  devote  herself  to  the  raising  of  wheal ; 
and  New  York,  relinquishing  the  culture  of  wheat,  should 
betake  herself  to  the  raising  of  coffee  and  sugar,  would 
not  both  communities  be  poorer,  and  would  not  the  price 
of  coffee,  sugar,  and  wheat  be  increased  over  the  whole 
world  ;  that  is,  would  not  all  the  world,  and  these  coun- 
tries especially,  be  poorer  than  they  are  now  .'' 

But,  whilst  it  is  thus  evident  that  every  nation  is  in- 
tended by  the  Creator  to  improve  its  own  advantages, 
that  is,  to  create  that  product  for  the  creation  of  which 
it  has  the  greatest  facilities  ;  it  is  also  the  fact,  that  every 
nation,  and  every  individual  of  that  nation,  desires  the 
productions  of  every  other  nation  ;  and  is  happy  in  pro- 
portion as  he  enjoys  them.  What  nation  could  be  happy 
without  the  cotton  of  the  South,  the  hemp  and  iron  of 
the  North,  or  the  wool,  wheat,  and  manufactures  of  tem- 
perate climates  ?  Nay,  let  any  individual  look  at  the 
clothes  which  he  wears,  the  furniture  of  his  room,  or 
the  food  and  utensils  of  his  table,  and  he  will  be  imme- 
diately convinced,  that  every  latitude  of  both  hemis- 
pheres, and  almost  every  country  on  the  globe  are  tribu- 
tary to  his  happiness.  His  own  country  has  peculiar 
adaptations,  but  they  are  adaptations  for  but  few  prod 
ucts,  while  every  citizen  of  that  country  requires  for 
his  convenience,  nay,  almost  for  his  existence,  the  pro- 
duction of  every  other  country.  These  desires  can  be 
gratified  only  by  national  exchanges.  Hence  we  see, 
that  national  exchanges  enter  into  the  constitution  of 
things  under  which  we  are  created,  as  much  as  individual 
exchanges. 

And   the  final  cause  of  this  constitution  is,  in  both 
(ases,  equally  evident. 

Individuals  are  made  thus  dependent  upon  each  other, 
in  order  to  render  harmony,  peace,  and  mutual  assist 
nnce,  their  interest  as  well  as  their  duty.  Where  men 
are  mutually  dependent  upon  each  other,  the  prosperity 
of  one,  is  the  prosperity  of  all  ;  and  the  adversity  of 
one,  is  the  adversity  of  all.  No  one  can  enjoy  many 
of  the  blessings  which  God  has  intended  for  him,  only 


160  NATIONAL     EXCHANGE. 

in  SO  far  as  others  enjoy  them  also  ;  and  no  one  can  b« 
d(!prlved  of  them,  unless  others  are  deprived  of  then/ 
to  a  considerable  degree  also.  Thus,  we  see  that  th« 
individual  progress  of  man,  is,  by  the  constitution  ot 
things,  indissolubly  connected  with,  .f  not  absolutely  de- 
pendent on,  his  social  progress. 

And,  for  the  same  reason,  nations  are  dependent 
upon  each  other.  From  this  universal  dependence,  wc 
^earn  that  God  intends  nations,  as  well  as  individuals,  to 
live  in  peace,  and  to  conduct  themselves  towards  each 
other  upon  the  principles  of  benevolence.  Where  all 
are  mutually  dependent,  as  in  the  former  case,  no  one 
can  prosper  without  increasing  the  prosperity  of  all,  nor 
suffer  without  bringing  sufl'ering  upon  all.  Hence,  it  is 
as  truly  our  interest  to  seek  the  happiness,  peace,  and 
prosperity  of  other  nations,  as  it  is  to  seek  the  happiness, 
peace,  and  prosperity  of  our  own  nation. 

9.  From  the  above  constitution  it  is  evident,  that  uni- 
versal exchange  is  as  necessary  to  the  welfare,  and  even 
to  the  existence  of  the  human  race,  as  universal  pro- 
duction. We  have  already  seen,  that  in  all  the  depart- 
ments of  human  industry,  a  great  saving,  both  of  time 
and  expense,  is  effected  by  division  of  labor.  This  is 
as  true  of  labor  in  exchange,  as  in  any  other  case. 
Since,  then,  exchanges  must  be  made,  it  will  be  better 
for  the  xohole,  if  a  part  of  a  society  devote  themselves 
exclusively  to  the  business  of  making  them. 

Thus  ;  suppose  that,  in  a  given  society,  the  labor  is 
divided,  so  that  each  individual  devotes  himself  to  the 
creation  of  a  given  product.  One  man  raises  wheat, 
another  rye,  another  wool  ;  one  labors  upon  iron,  anoth- 
er upon  wood,  another  upon  leather,  &c.  Now,  these 
persons  can  procure  the  productions  of  each  other  only 
by  exchange.  But  if  every  one,  every  time  he  needs 
any  thing,  is  obliged  to  leave  his  labor  to  find  a  pur- 
chaser for  his  product,  he  will  lose  much  time  himself, 
and  will  consume  a  large  portion  of  the  time  of  all  his 
neighbors  It  would  frequently  take  as  much  lime  to 
exchange  a  pair  of  shoes,  as  it  would  take  to  make 
ihem.     This  additional  time  must  enter  into  the  price  of 


NATIONAL     EXCHANGE-  161 

the  shoes  ;  and  hence,  these,  and  every  otlier  article  of 
consumption,  would  rise  in  price  accordingly. 

In  such  a  case  as  this,  it  would  clearly  be  a  great 
Denefit  to  the  whole  society,  if  some  one  should  de- 
vote himself  exclusively  to  the  business  of  making  ex- 
changes. Every  producer  might  then  deposit  with  him 
whatever  he  had  to  exchange,  instead  of  going  in  search 
of  a  purchaser.  When  this  was  done,  every  one,  by 
going  to  him,  might  ascertain  immediately,  what  was  to 
be  exchanged,  throughout  the  whole  community,  and  at 
what  price  ;  and  also,  what  was  required  in  exchange. 
He  would  thus  be  able,  at  once,  to  procure,  by  his  own 
product,  whatever  was  procurable  for  it ;  and  to  know 
what  he  must  produce,  in  order  that  he  may  procure 
what  he  may  need.  Thus,  the  labor  of  a  whole  day,  or 
of  several  days,  might  be  accomplished  in  a  few  min- 
utes, in  a  much  more  perfect  manner,  than  by  any  other 
method.  Hence,  as  all  the  time  unnecessarily  consumed 
in  the  other  method  would  be  saved,  much  more  time 
might  be  appropriated  to  production.  As,  in  a  given 
time,  and  with  given  labor,  there  would  be  greater  pro- 
duction, every  thing  would  be  cheaper,  that  is,  every 
one  would  be  richer  ;  and,  at  the  same  time,  a  reasona- 
ble profit  would  remain  for  him  who  devoted  his  time  to 
the  labor  of  exchange. 

Hence,  we  see  that  exchangers  are  as  necessary  to 
the  cheapness  of  production  as  producers  themselves. 
Hence,  we  also  see  how  absurd  is  the  outcry  sometimes 
raised  against  them,  because  it  is  said  they  produce  noth- 
ing. Did  not  a  large  class  of  the  community  devote 
themselves  to  this  employment,  it  is  impossible  to  con- 
ceive what  would  be  the  price  of  the  most  common  and 
necessary  utensil.  Were  the  farmer  obliged  to  carry 
his  wheat  or  his  cattle  to  Sheffield,  to  exchange  for  nee- 
dles for  his  wife,  or  for  a  sickle  for  himself,  who  could 
estimate  what  these  utensils  would  cost  .''  If  the  laborer 
were  obliged  to  go  lo  Birmingham  for  a  spade,  which 
he  must  use  in  New  York,  what  would  be  the  price  of  a 
spade,  and  how  would  he  ever  be  able  to  gain  a  subsis 
tunce .  The  laborer  may  sometimes  complain  that  the 
14* 


163  RETAIL     MCRCIIANTS. 

merchant  is  rich,  and  that  he  is  poor;  thai  the  n.eicliant 
stands  at  his  desk,  while  he  labors  in  the  street  ;  that 
the  nrierchant  rides  in  his  carriage,  while  he  travels  on 
foot.  But  it  may  be  to  him  some  consolation  to  remem- 
ber, that  were  not  the  merchant  rich,  the  laborer  would 
be  still  poorer,  for  every  article  would  be  dearer ;  and, 
besides,  there  would  be  no  one  to  pay  for  the  labor  with 
which  alone  he  is  able  to  purchase  it.  Were  not  the 
merchant  to  be  at  his  desk,  the  [)oor  n)an  would  have  no  , 
I  labor  to  do  in  the  street ;  and  were  not  the  merchant 
able  to  ride  in  his  carriage,  the  laborer  would  be  obliged 
to  go  barefoot.  And  accordingly,  we  see  that  when- 
ever mercantile  business,  that  is,  the  business  of  ex- 
changes, is  the  most  successful,  then  are  the  means  of 
living  cheaper  in  proportion  ;  and  then  are  the  operative 
classes  richer  ;  and  the  avenues  to  riches  the  most  widely 
open  to  all. 

The  persons  who  conduct  the  exchanges  of  a  com- 
munity are  called  merchants.  They  are  of  two  classes, 
viz  :  Retail  Merchants  and  Wholesale  Merchants. 

The  retail  merchant  carries  on  exchanges  between  the 
inhabitants  of  the  same  country.  He  purchases  of  the  man- 
ufacturer or  the  importer,  in  quantities  too  large  for  the 
means  of  the  individual  consumer,  and  sells  again  in  any 
quantities  that  the  consumer  may  desire.  This  produces 
a  great  saving  of  time,  and  of  course  of  expense,  to  the 
whole  community.  Were  the  manufacturer  obliged  to 
leave  his  labor,  to  sell  a  yard  of  calico,  the  price  of  cal- 
ico would  be  trebled.  Were  the  importer  obliged  to 
open  his  hogsheads,  to  sell  a  pound  of  sugar,  he  must 
charge  a  price  accordingly.  And,  besides,  as  each  im- 
porter and  manufacturer  is  supposed  to  confine  himself 
lo  one  particular  product,  the  purchaser  would  be  oblig- 
ed, frequently,  to  go  great  distances,  and  transact  with  a 
great  number  of  persons,  business  which  he  may  now 
be  able  to  accomplish  with  a  single  individual.  Every 
one  must  thus  perceive,  that  a  consumer  saves  much 
time  by  purchasing  his  sugar,  tea,  cofTee,  pepper,  salt, 
&c.,  at  one  shop,  instead  of  going  to  the  wholesale  im- 
porters of  these  articles  individually  ;  specially  if,  as  is 


WHOLESALE  MERCHANTS.  16S 

frequently  the  case,  they  lived  some  hundreds  of  miles 
asunder.  It  is  much  more  economical  to  buy  needles, 
tape,  cotton,  calico,  and  silk,  at  one  shop,  than  to  go  to 
the  several  individuals,  in  different  places,  who  ha\e  im- 
ported or  made  these  articles  in  large  quantities.  In 
consequence  of  this  advantage  to  the  community,  the 
retail  dealer  is  able  to  charge  a  profit  on  all  the  articles 
which  he  sells,  and,  at  the  same  time,  to  furnish  them  at 
a  much  lower  price  than  that  at  which  the  purchase/ 
could  procure  them,  in  any  other  manner.  The  pur- 
chaser not  only  procures  them  cheaper,  but  he  prpcures 
Jhem  of  a  better  qiiality.  It  is  the  business  of  the  re- 
tail dealer  to  understand  the  quality  of  every  article  in 
which  he  traffics,  and  it  is  for  his  interest  to  purchase  it 
cheaply,  and  of  as  good  quality  as  it  can  be  purchased 
in  the  market ;  since  it  is  on  the  goodness  and  cheapness 
of  his  articles,  that  his  custom  depends.  The  consumer 
is  thus  enabled  to  employ  for  his  benefit,  a  skill  vastly 
greater  than  his  own  ;  and  at  a  much  less  cost,  than  thai 
at  which  he  could  accomplish  the  business  himself. 
Hence  retail  dealers  are  as  necessary  to  the  prosperity 
of  a  country,  and  to  the  cheapness  of  productions,  as 
any  other  class  of  persons.  And  it  will  be  found  very 
universally,  that  it  iS  much  more  economical  to  employ 
their  services,  than  for  a  man  to  undertake  to  do  theii 
business  for  himself. 

The  wholesale  merchant^  conducts  the  exchanges  be 
tween  the  individuals  of  different  nations.  He  exports, 
in   bulk,  the   commodities  of  his  own  country,  and  im- 

iiorts,  in  return,  the  commodities  of  another  country, 
■lis  own  interest  induces  him  to  export  whatever  is  al 
the  lowest  price  in  his  own  country  ;  that  is,  of  what 
may  be  there  in  the  greatest  abundance  ;  and  bring  I  ack, 
in  return,  whatever  will  command  the  highest  price  at 
JKune  ;  tha.  is,  of  which  there  is  the  greatest  need 
And  his  own  interest  will,  of  course,  teach  him  to  pro 
cure  what  he  brings  home,  at  the  place  where  it  can  be 
had  at  the  cheapest  rate  ;  so  that  he  may  be  able  to  fur- 
nish it  al  the  hightesl  profit  to  himself,  and  at  the  lowest 
pi  ice  to  others.  Hence  liis  interest,  and  that  of  the 
community,  are  the  same.     It  is  for  the  interest  of  the 


164  WHOLESALE    MERCHAI^TS. 

community  that  those  commodities,  of  which  we  have  a 
superfluity,  should  be  exported  ;  and  the  fact  of  this  su- 
perfluity is  known  by  the  reduction  of  their  price,  in 
comparison  with  the  price  of  other  commodities  at  home, 
or  of  the  same  commodity  in  other  countries.  Jt  is  for 
the  interest  of  the  merchant  to  export  the  same  conmio- 
dity,  because  the  lower  the  price  at  which  he  purchases 
it  at  home,  on  tiie  better  terms  he  can  exchange  it 
abroad.  It  is  for  the  interest  of  the  community,  that 
those  objects  of  desire  u  hich  are  most  wanted  should  be 
brought  back  in  return  ;  and  the  rise  in  their  exchange- 
able value  is  the  proof  that  they  are  eo  wanted.  It  is 
for  the  merchant's  inte  3st,  also,  to  bring  back  these 
very  commodities  ;  for,  from  these  alone,  can  he  expect 
gain,  and  that  gain  will  be  the  greater,  in  proportion  as 
he  procures  them  on  the  most  favorable  terms  ;  that  is,  as 
he  procures  them  where  they  are  the  cheapest  and  most 
abundant.  Hence,  his  gain  will  be  in  proportion  as  he 
can  transfer  the  productions  of  the  earth  from  those  regions 
where  they  are  least  wanted,  to  those  regions  where  they 
are  most  wanted.  And  this  is  precisely  what  the  interests 
of  society  require  should  be  done. 

To  the  merchant,  it  is,  of  course,  a  matter  of  no  con- 
sequence, what  he  exports  and  what  he  imports.  Un- 
less a  commodity  were  more  wanted  at  home  than  that 
for  which  he  would  exchange  it,  he  could  have  no  mo- 
tive to  rnake  the  transfer.  And  that  it  is  so  wanted,  is 
evident  from  the  fact,  that  the  community  is  willing  to 
give  a  higher  price  for  it  than  for  that  which  is  exported. 
If  he  desired  it,  he  could  not  make  any  profit,  except 
by  consulting  the  wants  of  the  community  ;  and  thai 
profit  will  be  the  greater,  in  proportion  as  he  is  able  to 
consult  those  wants  with  the  greatest  possible  nicety. 
His  gains  are  the  gains  of  the  community,  and  his  losses 
are  the  losses  of  the  community.  Hence,  there  is  no 
reason  why  he  should,  in  any  manner,  be  restricted  in 
the  nature  or  the  quantity  of  the  articles  which  he  exports 
or  imports.  The  constitution  of  things,  and  his  own 
self-mteresi,  provide  all  the  regulating  forces  which  the 
nature  of  the  case  requires. 


excii&ngeablf:  valuk   of  products.        I6fi 
SFXTION   II. 

THE    GENERAL    DOCTRINES    OF    EXCHANGE. 

1.  Of  the  rate  of  Excliange,  or  the  exchangeable 
ealui  of  Products. 

If  two  men  hav^e  created  their  respective  products 
and  are  prepared  to  exchange  them,  it  is  manifest  thai 
the)  will  not  commonly  exchange  tliem,  quantity  for 
quantity  ;  because  a  given  amount  of  labor  will  procure 
a  much  larger  amount  of  some  products  than  of  others. 
The  same  laboi  which  will  procure  an  ounce  of  gold, 
will  procure  an  hundred  pounds  of  iron.  Hence,  the 
gold  miner  will  offer  to  exchange  labor  for  labor  ;  that 
is,  an  ounce,  of  gold  for  an  hundred  weight  of  iron. 
And,  if  the  miner  of  iron  will  not  exchange  on  these 
terms,  the  miner  of  gold  will  procure  his  iron  for  him- 
self. Since,  if  he  can  thus  procure  it  for  himself,  by  a 
less  amount  of  labor,  than  by  exchange,  he  will  do  so. 
Hence  it  is,  that  the  general  rate,  at  which  every  thmg 
is  exchanged,  is  the  amount  of  labor  which  it  costs  to 
produce  it. 

But  we  have  previously  seen,  that  labor  appears  in 
two  forms,  that  of  annual  capital,  and  of  fixed  capital. 
Both  of  these  enter  into  consideration,  when  we  speak 
of  labor  as  determining  the  exchangeable  value  of 
products. 

For  instance  :  Suppose  I  purchase  wheat,  and  grind 
it  by  hand  ;  I  sell  it  again  at  an  additional  price,  pio* 
portioned  to  the  labor  which  I  have  bestowed  upon  it. 
Suppose  I  thus  earn  money  enough  to  erect  a  wind- 
mill ;  I  shall  then  be  entitled  to  the  same  amount  of 
wages  per  day  for  my  labor,  and  also  to  an  additional 
sum  sufficient  to  pay  the  interest  of  what  was  expended 
in  my  wind-mill,  and  also  to  pay  for  its  wear  and  tear, 
in  performing  the  operation.  The  price  of  grinding 
was,  at  first,  only  that  of  immediate  labor ;  it  is  now  the 
price  of  immediate  labor,  together  with  the  interest  oo 


166     EXCH/>.NGEABLE  VALUE  OF  PRODUCTS. 

the  amount  of  the  pre-exerted  labor  It  is  however  to 
be  observed,  that  notwithstanding  I  am  receiving  emolu- 
ment flora  two  sources,  and  am  growing  rich  faster  than 
before,  it  is  on  terms  vastly  more  favorable  to  the  com- 
nmnity,  inasmuch  as  I  can,  for  the  same  remuneration, 
give  ten  times  as  much  in  return  as  I  could  before. 

The  case  is  the  same,  if  two  separate  individuals  are 
employed  in  the  operation,  the  one  owning  the  capita 
or  stock,  and  the  other  performing  the  labor.  In  this 
case,  the  cost  consists  of  the  wages  of  labor,  and  of  the 
interest  on,  and  the  wear  and  tear  of,  the  capital.  Here, 
however,  as  before,  the  community  is  the  gainer  ;  be- 
cause, for  the  wages  of  labor  and  interest  on  capital,  it 
receives  a  much  larger  product  than  it  received  before, 
for  the  wages  of  labor  alone.  Thus,  if  a  machine  cost 
one  thousand  dollars,  and  tliere  were  paid  for  the  use  of 
it  one  hundred  dollars  a  year,  this,  added  to  the  wages 
of  labor,  at  a  dollar  a  day,  would  be  four  hundred  dol- 
lars, allowing  three  hundred  working  days  a  year.  This 
would  he  but  one  hundred  dollars  more  than  would  be 
paid  for  the  labor  of  the  man  alone.  But  a  man,  with 
such  an  instrument,  would,  probably,  in  a  year,  accom- 
plish ten  times  as  much  work  as  he  could  accomplish 
without  it.  All  the  gain  of  the  change  is,  therefore,  for 
the  benefit  of  the  public.  We  see,  therefore,  that  labor 
and  the  interest  of  capital,  must,  necessarily  and  justly, 
enter  into  the  price  of  every  product  which  is  offered 
in 'exchange.  The  producer  can  never,  for  a  long  pe- 
riod, charge  more  than  a  fair  remuneration  for  his  labor 
and  capital  ;  because,  then,  it  would  be  cheaper  for  the 
other  party  to  produce  it  for  himself.  He  cannot,  for  a 
long  period^  charge  less  ;  because,  in  this  case,  he  will 
be  ruined,  and  must  leave  the  employment ;  and  thus  the 
number  of  producers  will  be  diminished,  and  the  value 
of  the  product  will  rise  to  the  average  rate  of  profit. 

Nevertheless,  for  short  periods^  the  excliangeable 
value  of  any  product  may  be  raised  above  the  reason- 
able rate  of  profit  If  the  demand  exceed  the  supply, 
there  will  be  a  competition  among  the  buyers  ;  the  more 
wealthy  will  overbid  the  less  wealthy,  and  the  price  will 


EXCHANGEABLE  VALUE  OF  PRODUCTS.     167 

rise.  This  rise  of  price  will  induce  others  to  devote 
themselves  to  supplying  the  demand,  and  thus  the  price 
will  fall.  If  the  supply  be  greater  than  the  demand, 
there  will  arise  a  competition  among  the  sellers,  and  the 
price  will  fall,  and  will  remain  depressed,  until  either 
the  demand  increase,  or  else  until  so  many  leave  tbo 
employment,  as  shall  reduce  the  supply  to  the  average 
demand. 

It  is  evident  that  it  makes  no  difference  as  to  tne 
result,  whether  the  ratio  between -supply  and  demand  be 
disturbed  by  a  change  in  supply  or  in  demand.  If  the 
demand  continue  the  same,  a  diminished  supply  pro- 
duces the  same  effect  as  would  be  produced  by  an  in- 
creased demand,  while  the  supply  remained  the  same. 
And,  on  the  other  hand,  demand  being  the  same,  ar 
increased  supply  produces  the  samejesult  as  when,  sup- 
ply being  the  same,  the  demand  is  ijpcreased  ;  that  is,  in"^***' 
the  one  case,  the  exchangeable  value  of  die  product  will 
rise  ;  in  the  other  case,  it  will  fall. 

It  deserves,  however,  to  be  remarked,  that  this  effect, 
produced  by  the  disturbance  of  the  ratio  between  supply 
and  demand,  will  be  greater  or  less,  according  to  sev- 
eral circumstances.     These  are  : 

1.  The  durability  of  the  commodity.  If  it  be  one 
which,  unless  it  be  consumed  immediately,  will  become 
worthless,  the  fall  of  price,  from  increased  supply,  is 
great.  Such  is  the  case  with  oranges,  lemons,  figs, 
fresh  fish,  &c.  If,  on  the  contrary,  it  be  a  commodity 
which  will  endure  for  years,  without  loss  of  intrinsic 
value,  the  effect  will  be  less.  Thus,  an  increased  sup- 
ply of  iron,  produces  in  the  market  a  comparat  vely 
small  variation  in  the  price. 

2.  Variation  of  price,  from  this  cause,  depends,  also, 
upon  the  ease  or  difficulty  with  which  the  supply  may 
he  increased.  Thus,  manufactured  articles  can  geneV' 
ally  be  produced  in  a  short  time,  and,  if  necessary,  in  a 
much  more  than  usual  quantity.      Agricultural  products, 

an  the  contrary,  require  a  year,  in  order  to  be  brought     - 
lo  perfection.     Hence,  if  a  crop  fail  this  year,  we  know 
that  there  must  be  a  diminished  supply  in  the   whole 


168  EXCHANGEABLE    VALUE    OF    PRODUCTS. 

country,  for  the  remainder  of  the  year  ;  and  hence,  as 
there  must  be  a  scarcity,  every  one  is  prepared  to  give 
as  much  as  he  is  able.  But,  if  cotton  cloth  be  high, 
unless  the  rise  of  price  be  owing  to  a  diminished  pro- 
duction of  the  material,  this  high  price  will  cause  more 
cloth  to  be  made,  and  hence,  before  long,  the  price  will 
fall.  We  therefore  purchase  only  as  much  as  we  abso- 
lutely naed,  and  wait  for  the  favorable  change. 

3.  It  will  be  affected  by  the  nature  of  the  demand 
for  the  article.  If  it  be  an  article  of  universal  neces- 
sity, it  will  rise  more  rapidly  by  scarcity,  and  sink  less 
rapidly  by  increased  supply  ;  while,  if  it  be  an  article  of 
mere  luxury,  it  will  rise  less  rapidly  by  scarcity,  and 
smk  more  rapidly  by  increased  supply.  When  every 
one  must  have  a  commodity,  the  demand  is  constant, 
and  every  one  is  alarmed  at  the  prospect  of  suffering  ; 
hence,  he  purchases  it  at  any  price.  And,  on  the  other 
hand,  if  the  supply  be  abundant,  the  holder  knows  that 
the  ordinary  consumption  will  soon  reduce  the  quantity 
in  market,  and  rather  than  sell  at  a  reduced  profit,  he 
will  wait  for  the  change  of  price.  On  the  contrary,  if 
an  article  of  luxury  be  scarce,  men  begin  to  abandon  it, 
and  thus  the  demand  is  quickly  reduced.  If  it  be  abun- 
dant, the  number  of  purchasers  does  not  increase  with 
the  supply,  because  men  have  not  yet  learned  to  use  it  ; 
hence,  its  fall  in  price  is  rapid,  being  not  sustained  by  a 
correspondent  increase  of  demand. 

These,  I  think,  are  the  principal  circumstances  which 
enter  into  the  exchangeable  value  of  products.  They  are 
variously  combined  and  modified,  so  that  they  may  some- 
times counteract,  and  sometimes  exaggerate  each  other. 
Bui,  I  think,  that,  by  applying  them  to  the  actual  occur- 
rences of  life,  we  may  generally  be  able  to  explain  the 
fluctuations  of  price,  which  are  daily  taking  place  in  the 
market 

II.  When  an  article  of  produce  is  offered  for  ex- 
change, the  producer  has  conferred  upon  it  his  last 
value,  and  it  is  now  ready  for  the  consumer. 

By  the  consumer,  here,  I  do  not  mean  him  only  who 
gratifies  his  desire  by  the  ultimate   destruction  of  the 


RAPIDITY    OF     EXCHANGES.  169 

prcdiiot,  but  also  him  who  receives  it  for  the  purpose  of 
giving  to  it  some  other  modification.  The  exchanger 
confers  upon  it  no  new  value.  It  is  the  same  when  it 
passes  out  of  his  hands  to  the  consumer,  as  when  it 
came  into  his  hands  from  the  producer  :  that  is,  in  gen- 
eral, exchange  confers  no  value  at  all  upon  products  ; 
since  they  receive  no  modification  by  passing  from  the 
hands  of  one  person  to  those  of  another. 

1.  Hence,  it  will  be  seen,  that  the  more  rapidly  ex- 
changes are  made,  the  better  The  more  rapidly  the)' 
are  made,  the  less  is  the  loss  of  interest,  and  the  smaller 
the  advance  which  the  exchanger  must  charge  for  his 
labor.  If  a  merchant  purchase  to-day  a  thousand  dol- 
lars' worth  of  iron,  which  he  sells  to-morrow,  he  charges 
us  for  his  labor  and  skill,  and  adds  only  the  interest  for 
one  day  upon  his  capital.  If  he  must  keep  the  iron  a 
whole  year  before  he  sell  it,  he  must  charge  the  inlerost 
of  a  whole  year,  or  else  he  will  be  the  loser  by  his 
operation. 

Nor  is  this  all.  If  he  sell  his  iron  to-morrow,  he 
may  invest  the  same  sum  in  iron,  and  sell  it  again  fifty 
limes  in  the  course  of  the  year  ;  and  thus  receive  a 
profit  fifty  times  a  year,  upon  the  use  of  his  skill  and 
labor,  while,  in  the  other  case,  he  receives  this  profit 
but  ODce.  Hence,  when  exchanges  are  rapid,  he  can 
afford  to  exchange  at  a  less  rate  for  his  labor  and  skill, 
than  when  they  are  slow.  And  hence,  brisk  exchanges 
are  for  the  benefit  of  both  buyer  and  seller  ;  and  a  ben- 
efit to  one,  is  a  benefit  to  all.  It  is  for  this  reason, 
among  others,  that  we  can  frequently  purchase  at  a 
cheaper  rate  in  a  large  city,  than  in  a  country  town. 

2.  And  hence  we  see  a  reason,  why  the  profit  upon 
one  operation  in  some  kinds  of  exchange,  is  greater  than 
that  in  others.  The  profits  of  the  wholesale  merchant 
on  a  pound  of  tea,  are,  for  instance,  greater  than  those 
of  the  retail  merchant.  He  who  sends  his  capital  to  the 
Kast  Indies,  and  receives  in  return  ^  cargo  of  teas, 
must  charge  interest  and  risk,  for.  the  whole  time  con- 
sumed, from  the  day  that  he  parts  with  his  property, 
dntil  the  day  that  he  receives  it  again.     This  may  be 

15 


170  DIFFKRTENCES    OF    PPOfiT. 

nearly  two  years.  The  retail  merchant  who  purchases 
one  of  those  chests  of  tea,  may  sell  it  all  in  a  week,  and 
thus  invest  it  fifty  times  in  the  course  of  a  year. 
Now,  if  the  profit  on  an  exchange  were  as  great  in  the 
one  case  as  in  the  other,  the  annual  gains  of  the  retail 
merchant  would  be  exorbitant.  These  are  reduced,  by 
competition,  to  the  average  level  ;  and  hence,  his  gains 
on  any  single  operation  are  much  less  than  those  of  the 
wholesale  merchant.  The  same  principle  applies  to 
production.  The  greater  the  time  consumed  in  an  op- 
eration, the  larger  is  the  profit  on  each  article  which 
justly  belongs  to  the  producer. 

3.  But,  though  the  act  of  exchange  add  nothing  to 
the  absolute  value  of  the  commodity,  it  adds  greatly  to 
Its  relative  value,  that  is,  to  the  convenience  both  of 
the  buyer  and  the  seller  ;  inasmuch  as  it  enables  both  to 
gratify  a  desire,  which,  otherwise,  would  have  been  un- 
satisfied. If  I  want  a  pen-knife  more  than  I  want  a 
dollar,  and  a  hardware  merchant  wants  a  dollar  more 
than  he  wants  a  pen-knife,  we  make  the  exchange  with 
each  other.  The  dollar  is  the  same  as  before  ;  it  will 
buy  no  more  in  his  hands  than  it  will  in  mine.  The 
pen-knife  is  the  same  as  before  ;  it  has  neither  gained 
nor  lost  ;  and  I  might,  if  I  chose,  exchange  it  with  the 
next  man  I  met,  for  a  dollar.  But,  both  the  merchant 
and  myself  are  benefited  by  the  exchange.  I  can  use 
the  knife  for  purposes  for  which  T  could  not  use  the 
dollar  ;  and  thus  render  my  labor  per  day  much  more 
valuable.  The  merchant  has  received  a  full  remunera- 
tion for  his  labor,  capital,  and  skill,  and  is,  by  so  much, 
richer  than  he  was  before.  That  both  of  us  have  been 
benefited  by  the  exchange,  is  evident  from  the  fact,  that 
noiiher  of  us  would  make  the  exchange  back  again. 
If  a  hungry  man  have  a  piece  of  silver,  and  a  bakei 
have  a  loaf  of  bread,  they  will  readily  exchange  with 
each  other.  The  silver  is  the  same,  and  the  loaf  is  the 
same,  as  before  ;  but  still,  both  parties  are  richer  and 
happier  ;  and  neither  would  the  hungry  man  take  back 
the  same  piece  of  silver  for  his  loaf ;  nor  the  baker  take 
*^«»ck  the  loaf  for  the  silver. 


DIFFERENCES    OF    PROFIT  171 

The  case  is  the  same  with  nations.  If  a  nation  ex- 
change iron,  of  which  it  has  more  than  it  can  consume, 
for  wheat,  which  it  cannot  produce,  with  a  nation  which 
has  more  wheat  than  it  can  consume,  but  produces  no 
iron,  the  wheat  and  the  iron  are  the  same  as  before  ; 
but  each  nation  is  richer  and  happier  :  each  has  one 
more  desire  gratified  than  before,  and  is,  able  the  next 
year  to  increase,  more  largely,  its  stock  of  production. 
That  both  are  happier  than  before,  is  evident  ;  because 
neither  would  reverse  the  exchange,  if  it  were  in  its 
power.  And  thus,  in  general,  whenever  two  nations 
mutually  wish  to  exchange  their  productions  with  each 
other,  and  are  mutually  gratified  when  the  exchange  is 
made,  it  is  evident  that  both  are  made  happier,  and  thai 
the  exchange  has  been  advantageous  to  both  parties. 

Hence  we  see,  how  fallacious  is  the  notion  formerly 
entertained,  that,  by  exchange,  only  one  party  is  bene- 
fited ;  and  consequently,  that  what  one  party  gains,  the 
other  party  loses.  Were  this  the  case,  no  country  could 
grow  rich  by  exchange,  unless  by  impoverishing  every 
other  country  ;  and  the  gain  of  one  nation,  would  be 
nothing  else  than  a  transfer  of  the  wealth  of  other  coun-r 
tries  to  itself.  On  the  contrary,  precisely  the  reverse  is 
the  case.  The  most  favorable  commerce  to  any  one 
country,  is,  that  by  which  the  riches  of  both  countries 
are  the  most  rapidly  increased.  A  merchant,  whose 
gains  were  all  derived  from  the  impoverishment  of  his 
(Customers,  would  very  soon  have  none  but  paupers  foi 
neighbors.  A  nation,  whose  traffic  caused  the  impov 
(Tishment  of  another  nation,  would  very  soon  be  ob'iged 
to  discontinue  comtnerce  The  only  traffic  of  this  sort, 
is  the  African  slave-trade,  and  the  result  has  been  the 
almost  entire  depopulation  of  the  slave  coast.  And  thus, 
y  we  see,  in  political  economy,  as  in  morals,  every  benefit 
is  mutual  ;  and  we  cannot,  in  the  one  case,  any  more 
than  in  the  other,  really  do  good  to  ourselves,  without 
iloing  good  to  others  ;  nor  do  good  to  others,  without 
also  doing  good  to  ourselves. 

In  what  I  have  said  of  exchange,  it  is  to  be  observecJ 
that  I  have  sj^oken  of  exchange  simply,  and  not  as  com- 


172  CONDITIONS    OF    EXCHANGE. 

billed  with  the  labor  of  transportatior .  The  labor  of 
transportatiDn  gives  an  additional  value  to  an  article  i 
that  is,  it  confers  upon  it  change  of  place.  This  has 
been  already  spoken  of.  It  is  true,  a  merchant  frequent- 
ly pel  forms  this  labor,  or  causes  it  to  be  performed.  In 
this  case,  he  is  entitled  to  a  double  profit ;  first,  for  the 
labor  of  transportation,  and  secondly,  for  the  labor  and 
skill  of  exchange.  He  who  labors  in  either  of  these 
employments,  is  entided  to  the  profit  derived  from  that 
in  which  he  labors  ;  and,  he  who  labors  in  both,  is  enti- 
tled to  the  profit  of  both.  In  speaking  of  the-  profit  of 
exchange^  it  is  always  to  be  observed,  that  the  profit  of 
the  merchant  is  derived,  partly^  from  his  labor  and  skill, 
and  partly  from  his  capital.  He  who  exports  to  France 
one  hundred  thousand  dollars'  worth  of  cotton,  must  first 
buy  the  cotton  ;  that  is,  he  must  Jiave  one  hundred  thou- 
sand dollars  to  invest  in  this  exchange.  He  exchanges 
the  cotton  for  silks  or  for  calicos,  and  replaces  his  first 
investment.  He  is  entitled  to  interest  and  risk  on  that 
capital,  for  all  the  time  that  it  is  out  of  his  hands,  besides 
the  remuneration  for  his  labor  and  skill. 
•  ni.  Of  the  conditions  on  which  the  frequency  or  in- 
frequency  of  exchanges  depends. 

It  is  manifest  that  the  more  numerous  are  the  ex- 
changes, the  better  must  it  be  for  a  community.  As  no 
one  exchanges,  except  to  gratify  his  desires,  and  to  im- 
prove his  condition,  the  more  numerous  ihe  exchanges, 
the  greater  the  number  of  desires  which  will  be  gratified, 
and  the  more  universally  will  the  condition  of  a  peoplu 
be  improved.  It  is  also  evident,  that  facility  of  ex- 
change is  one  of  the  greatest  stimulants  to  production. 
ff  a  man  cannot  transform  his  products  into  what  he  de- 
sires, he  will  labor  for  nothing  but  the  mere  necessaries 
of  life.  But  in  just  so  far  as  he  is  able,  by  exchanging 
the  products  of  his  labor,  to  procure  objects  of  desire, 
his  motives  to  industry  will  be  quickened.  And  the 
same  is  true  of  nations.  Every  one,  vvliether  poet,  or 
philosopher,  or  traveller,  in  setting  forth  the  prosperity 
of  a  country,  has  described  its  harbor,s  thronged  with 
ships,  its  roads  covered  with  merchandise,  and  its  saila 


CONDITIONS     OF    EXCHANGE.  173 

whitening  every  ocean.  But  all  these  are  only  so  many 
forms  of  expressing  the  general  fact,  that  a  nation's  ex- 
changes, both  internal  and  external,  are  abundant  ami 
prosperous  ;  that  is,  that  its  producers  are  able,  by  their 
own  labor,  easily  to  avail  themselves  of  every  other  pro- 
duction which  they  may  desire. 

We  have  said  that  exchange  is  a  voluntary  and  mutual 
tiausfer  of  the  right  of  property. 

If  this  be  the  case,  there  must  exist,  in  aach  party, 

1.  A  mutual  desire  for  the  property  of  the  other, 
greater  ihan  the  desire  for  his  own. 

2.  Mutual  ability  ;  that  is,  each  party  must  be  alia  to 
offer  to  the  other,  such  a  consideration  as  will  induce 
him  to  make  the  exchange. 

Where  both  of  these  exist,  exchanges  will,  of  course, 
take  place.  If  A  have  a  dollar  which  he  wishes  to  part 
with  for  B's  knife,  and  B  has  a  knife  which  he  wishes  to 
part  with  for  A's  dollar  ;  as  soon  as  each  knows  the  wish 
of  the  other,  they  will  mutually  gratify  each  other,  and 
the  exchange  will  take  place. 

3.  As,  however,  the  right  of  property  alone  is  fre- 
quently transferred,  while  the  property  itself  is  not  de- 
livered at  the  time  of  the  exchange,  there  is  always,  in 
such  an  act  of  exchange,  a  liability  to  fraud.  Besides, 
a  commodity  may  not  prove  to  be  as  good  as  it  was  rep- 
resented, or  the  owner's  title  may  not  be  satisfactory. 
In  all  such  cases,  there  is  an  opportunity  for  the  practi(?o 
of  dishonesty ;  and  the  risk  of  suffering  from  such  dis- 
honesty, would,  of  course,  diminish  the  frequency  of 
exchanges.  Hence,  frequency  of  exchanges  will  also 
depend  upon  security  of  the  right  of  property,  and  tho 
existence  of  the  means  for  enforcing  that  right. 

If  we  now  reflect  upon  these  facts,  I  think  we  must 
perceive,  that  the  desires  of  a  people  for  exchange,  will 
depeiid,  principally,  upon  their  intelligence.  Their  abil- 
ity will  depend  upon  the  productiveness  of  their  labor  and 
capita, ,  and  the  security  of  property  will  depend  upon 
their  indtiidual  and  social  morality.  That  is,  exchanges 
will  be  frequent  in  proportion  to  the  intelligence^  teeaUki 
and  moral  character  of  a  people.. 
15* 


174  CONDITIONS    OF    EXCHANGE. 

1.  Exchanges  will  be  frequent  or  unfrequeni,  in  pro- 
portion to  the  intelligence  or  ignorance  of  a  people.  It 
is  only  by  the  diffusion  of  knowledge  that  men  asceitain 
how  their  desires  may  be  gratified.  It  is  by  knowledge 
that  the  desires  of  man  are  brought  into  relation  with  tlie 
objects  intended  by  his  Creator  for  their  gratification. 
Every  one  knows  how  the  dormant  desire  for  exchange 
is  awakened  in  the  bosom  of  a  child,  the  moment  he 
enters  a  toy  shop.  I  suppose  that  strangers  rarely  pass 
[hrough  the  streets  of  a  large  city,  without  being  strong- 
ly, if  not  successfully  tempted  to  lighten  their  pockets, 
before  the  termination  of  their  journey.  Every  leader 
knows,  how  quickly  his  desire  for  books  is  enkindled, 
by  passing  a  few  minutes  in  a  book  store.  And  thus  we 
see,  how  instantaneously  a  desire  for  exchange  arises  in 
the  breasts  of  savages,  as  soon  as  they  are  brought  into 
contact  with  civilized  man.  A  multitude  of  objects  for 
the  gratification  of  desire,  of  which  they  were  previously 
ignorant,  is  set  before  them ;  and  they  are  frequently 
stimulated  to  exchange,  to  their  own  disadvantage.  The 
early  voyagers  give  us  striking  illustrations  of  this  fact. 
They  represent  themselves  as  overwhelmed  with  these 
rude  people,  who  were  incessantly  offering  every  thing 
which  they  supposed  their  visitors  would  desire,  for  nails, 
beads,  pieces  of  looking-glass,  iron  hoops,  and  almost 
every  thing  on  which  they  could  lay  their  hands. 

*  When,  however,  I  speak  of  intellectual  cultivation 
in  this  connexion,  it  is  to  be  understood  that  I  by  no 
means  refer  exclusively  to  the  knowledge  and  mental 
discipline  which  is  acquired  by  the  reading  of  books. 
Books,  though  important  to  the  intellectual  progress  of 
a  country,  are  only  one  means  of  introducing  and  circu- 
lating knowledge.  Knowledge  is  gained  by  observation, 
and  by  conversation  ;  and  it  is,  if  I  may  say  so,  absorb- 
ed from  the  intellectual  atmosphere  which  we  breathe  ; 
it  is  derived  from  the  general  spirit  of  the  community  in 
which  we  live.  Thus,  a  man  rarely  goes  from  home  in- 
to another  country,  or  into  another  section  of  the  same- 
country,  without  obtaining  a  knowledge  of  various  con- 
veniences of  which  he'  was  before  ignorant.     Familiar 


CONDITIONS    OF     EXCHANGE.  175 

intercourse  between  men  of  different  pursuits,  conduces 
to  the  same  result.  Newspapers,  filled  with  advertise- 
ments, circulated  over  every  district-  of  a  country,  have, 
in  this  respect,  a  powerful  effect.  All  these  causes 
combine  to  show  every  individual  what  he  can  produce 
which  other  men  want,  and  how  he  may,  by  exchange, 
procure  from  them  what  he  wants  himself. 

We  see  all  this  illustrated,  in  every  district  separated 
oy  nature  from  the  surrounding  country,  as  a  valley  in- 
closed by  mountains  difficult  of  access,  or  an  island 
which  has  but  rare  communication  with  the  main  land. 
The  progress  of  such  a  population  in  the  arts,  and  in 
possessing  themselves  of  the  conveniences  of  life,  is  al- 
ways much  less  rapid  than  that  of  their  more  highly 
favored  neighbors.  They  know  but  little  of  what  is  go- 
ing on  around  them,  and  their  desires  are  but  feebly 
stimulated  to  improve  their  condition.  The  state  of 
such  a  population  is  always  suddenly  and  rapidly  improv- 
ed, by  any  means  of  easy  communication  with  their 
neighbors.  They  are  stimulated  at  once  to  develope 
their  own  resources,  and  thus  to  share  in  the  benefits 
enjoyed  by  those  around  them.  Thus,  the  Pastor 
Oberlin,  a  truly  great  and  good  man,  when  he  wished  to 
improve  the  condiiion  of  the  Ban  de  la  Roche,  com- 
menced by  inducing  his  people  to  repair  their  roads. 
Hence  we  see,  how  important,  in  this  respect,  to  a 
nation,  are  all  means  of  internal  communication,  and  the 
facilities  for  the  universal  circulation  of  the  commonest 
forms  of  knowledge. 

2.  Exchanges  will  be  numerous,  in  proportion  to  the 
producticeness  of  a  country. 

We  have  already  seen,  that  simple  desire,  in  both 
parlies,  is  not  sufficient  to  effect  exchanges.  Each  party 
must  both  possess,  and  be  willing  to  part  with,  so  large 
a  portion  of  the  product  desired  by  the  other  party,  that 
the  other  is  willing  to  make  the  desired  exchange. 
l'i\  ery  man  desires  a  horse  and  carriage,  and  every  man 
who  eithi'r  raises  horses  or  manufactures  carriages,  is 
willing  to  part  with  them  for  an  equivalent.  But  until 
every  man  have  something  to  offer  for  a  horse  and  car- 


176  CONDITIONS    OF    EXCHAN«?E. 

ijage,  vvhicli  uill  induce  the  other  parties  to  make  llje 
exchange,  every  one  cannot  be  so  accommodated.  If 
A  have  wheat  which  he  is  wilhng  to  exchange  for 
rye,  but  if  B  either  have  no  rye  which  he  is  able  to  of- 
fer in  exchange,  or  have  it  not  in  sufficient  quantity  tc 
remunerate  tiie  labor  of  A,  no  exchange  can  take  place. 
But  if  both  have  been  stfccessful,  and  each  have  enough 
of  liis  own  product  for  his  own  use,  and  is  also  able  tc 
offer,  on  fair  terms,  a  portion  in  exchange,  they  may 
then  exchange  with  advantage,  and,  of  course,  they  will 
do  so. 

Or,  again  :  If  A  and  B  have  only  so  much  surplus 
product  as  will  enable  them  to  make  this  one  exchange 
with  each  other,  much  as  they  may  desire  the  product  of 
C  and  D,  these  last  desires  must  be  ungratihed  ;  since 
no  further  exchange  can  take  place.  Or,  on  the  contra- 
ry, if  A  and  B  have  abundance,  but  C  and  D  have 
been  unfortunate,  and  have  nothing  which  they  can  part 
with,  the  same  result  will  take  place.  But  let  A,  B,  C  and 
D  be  all  blessed  with  abundance,  and  all  have  surplus  prod- 
ucts which  they  are  willing  to  exchange  with  each  other, 
and  in  such  prt)portions  as  will  reward  each  other's  indus- 
try, and  they  will  all  exchange  accordingly.  Thus,  ex- 
changes must  always  be  most  numerous,  in  the  most  pros- 
perous condition  of  a  country  ;  or,  as  every  one  knows, 
mercantile  business  is  most  prosperous,  that  is,  exchanges 
arc  most  abundant,  when  manufacturing,  agricultural,  and 
air  other  kinds  of  industry  are  most  productive. 

And  we  see,  moreover,  that  this  principle  is  of  uni- 
versal application.  A  good  harvest  in  one  country,  is  a 
benefit  to  every  other  country  ;  because  the  favored 
country  desires  a  larger  amount  of  the  production?,  ol 
her  neighbors,  and  has  a  larger  fund  wherewith  to  pay 
for  them.  Hence,  the  exchanges  between  such  a  coun 
try  and  every  other  country,  are  increased.  On  the 
contrary,  a  famine,  or  a  war,  or  any  other  calamity  in 
one  country,  is  a  calamity  to  every  other  country,  be- 
cause the  unfortunate  country  wants  fewer  of  the  pro- 
ductions of  its  neighbors  ;  since  it  has  less  wherewith  to 
pay  for  them.     Its  exchanges,  therefore,  are  of  necessi- 


CONDITIONS    OF    EXCHANGE.  177 

ly  diminished.  Hence,  that  merchant  is  short  sighted, 
as  well  as  morally  thoughtless,  who  expects  to  grow 
rich  by  short  crops,  civil  dissensions,  calamity,  or  war, 
in  the  country  with  which  lie^trafBcs.  A  wiser  and  fur- 
ther-sighted reflection,  would  leach  him  that  it  is  very 
difficult  to  grow  rich  by  trading  with  beggars,  and  that  the 
benefit  of  one  is  always  the  benefit  of  all.  To  illustrate 
all  this  by  a  single  case,  let  us  ask  what  would  be  the 
arnoimt  of  exchange  efiected  by  the  inhabitants  of  deal 
Britain,  France,  and  the  United  States,  either  among 
themselves  or  with  each  other,  if  the  productiveness  of 
these  several  countries  were  no  greater  than  it  was  in 
the  tirwe  of  Julius  Caesar  .'' 

3.  Exchanges  will  be  numerous  in  proportion  to  the 
moral  character  of  a  people. 

1.  Individual  n)orality  is  highly  favorable  to  exchange, 
masmuch  as  it  lessens  the  liability  to  fraud,  and,  of 
course,  the  risk  to  which  exchanges  are  exposed.  No 
one  will,  if  he  can  avoid  it,  trade  with  a  knave.  In 
proportion  to  the  prevalence  of  knavery,  will  be  the  dis- 
inclination to  exchange. 

2.  On  the  general  moral  character  of  a  people  depend 
the  equity  of  their  laws,  atid,  of  course,  the  full  enjoy- 
ment of  the  right  of  properly.  As  has  before  been  re- 
marked, exchanges  are  not  always  completed  at  the  in- 
stant. One  party  frequently  parts  with  his  properly  to- 
day, on  condition  of  receiving  the  property  of  his  neigh- 
bor a  month  hence.  Here  is  a  liability  to  fraud.  Un- 
less the  one  party  have,  by  means  of  just  and  equitable 
law,  the  power  of  enforcing  contracts,  exchanges  will  he 
gieatly  restricted. 

3.  On  the  morality  and  intelligence  of  a  people,  will 
greatly  depend  the  freedom  of  its  civil  constitution  ; 
that  is,  the  accuracy  with  which  it  limits  the  power  of 
society,  over  the  person  and  property  of  the  individual 
When  these  are  improperly  understood,  or  insufficientljr 
guarded,  the  property  of  the  citizen  is  liable  lo  sufl'ei 
from  the  avarice  or  the  oppression  of  rulers.  To  this 
evil,  property,  imdergoing  exchange,  is  specially  liable. 
Exchange  exposes  lo  the  view  of  the  public,  the  posses- 


178  STAGNATION    OF     BUSINESS. 

sion  of  the  parties,  and,  of  course,  enables  a  lyrant  to 
seize  upon  them  with  greater  certainty.  For  this  reason, 
exchanges  are  frequently,  under  bad  governments,  made 
in  secret ;  and,  for  this  reason,  under  such  a  govern- 
ment, the}  are  always  as  few  as  possible,  and  at  great 
expense  to  the  consumer. 

Thus,  in  general,  the  frequency  of  exchanges  will  be 
in  proportion  to  the  wealth,  and  to  the  intellectual  and 
moral  character,  of  a  people.  And  since,  as  the  pro- 
gress of  a  nation,  in  these  respects,  will  promote  her 
mercantile  prosperity,  we  may  easily  see  what  will  de- 
press it.  The  frequency  of  exchanges  will  diminish,  as 
a  nation  decreases  in  intelligence  and  virtue.  Of  the 
liuth  of  this  remark,  all  history  is  filled  with  illustra- 
tions. After  what  has  already  been  said,  it  will  not  be 
necessary  to  enlarge  upon  this  topic.  These  effects, 
moreover,  are  principally  to  be  observed,  by  comparing 
the  condition  of  a  country  at  long  periods  ;  and  tracing 
the  effects  of  measures  and  events  in  those  directions 
which  are  not  always  obvious  to  every  observer. 

While,  however,  the  government  and  laws  of  a  coun- 
try remain  the  same,  there  frequently  occurs  a  tempo- 
rary diminution  of  exchanges,  which  is  denominated  a 
stagnation  of  business.  This  deserves  to  be  noticed. 
As  the  business  of  a  merchant  is  to  execute  exchanges  ; 
that  is,  to  perform  the  labor  of  exchanging,  for  those 
who  wish  to  exchange  their  products,  a  stagnation  of 
mercantile  business  must  occur,  when  there  is  less  of 
this  operation  to  be  performed  ;  that  is,  the  merchant  is 
leady  to  perform  the  exchange,  but  a  less  number  of 
persons  desire  it  to  be  performed. 

The  reason  why  the  merchant  feels  this  more  serious- 
ly than  any  other  man,  is  obvious.  All  his  capital  is 
invested  in  this  kind  of  operation.  He  buys  of  one 
party,  that  is,  invests  his  capital  in  one  kind  of  product, 
and  sells  to  another,  that  is,  receives  his  product  in  ex- 
change, and  he  supports  himself  by  the  profit  of  these 
two  operations.  The  moment  exchanges  cease,  his 
means  of  support  are  dried  up  ;  for  he  is  supported  only 
l>v    making    them.      He  can    buy,  but    he    cannot    sell 


STAGNATION     OF     BUSINESS.  179 

Hence  there  arises,  as  it  is  called,  a  stagnation  of  busi- 
ness ;  that  is,  a  cessation  or  diminution  of  exchanges. 
The  principal  causes  of  this,  are  the  following  : 

1 .  It  may  arise  from  a  diminished  desire  for  a  partic- 
ular product.  Thus  the  decrease  of  the  Catholic  reli- 
gion, during  the  wars  of  the  French  revolution,  dimin- 
ished the  desire  for  fish,  which  the  Catholics  eat  in 
Lent,  and  on  fast  days.  This  produced  a  stagnation  of 
business  in  the  fish  trade. 

It  may  arise  from  fchange  of  fashion.  Thus,  when 
shoe-strings  were  substituted  for  shoe-buckles,  the  de- 
mand for  shoe-buckles  ceased  ;  the  manufacturers  of 
shoe-buckles  were  thrown  out  of  employment  ;  and 
there  was  a  stagnation  of  business  in  this    kind  of  trade. 

It  may  arise  from  the  fact,  that  ons  particular  product 
has  been  supplanted  by  another.  Thus  the  increasing 
cheapness  of  cotton  cloth,  has  materially  diminished  the 
demand  for  linen. 

Whenever,  from  any  cause,  the  desires  of  men  change, 
then  the  traffic  in  the  article  neglected,  must  be  dimin- 
ished ;  since  it  is  veiy  difficult  to  sell  to  a  man  a  com- 
modity which  he  knows  he  does  not  want.  To  this 
disadvantage,  all  articles  which  derive  their  value  from 
fashion  and  caprice  are  exposed  ;  and,  on  this  account, 
they  are  always  sold  at  a  higher  profit,  in  order  to  com- 
pensate for  the  additional  risk. 

2.  Stagnation  in  business  may  arise  from  a  temporary 
failure  in  production.  This  must,  wf  necessity,  produce 
it ;  since,  as  we  have  already  seen,  two  men  cannot  ex- 
change, unless  they  both  have  something  to  part  with  ;  . 
and  the  amount  and  number  of  every  man's  excha^igcs 
will  be  in  proportion  to  the  amount  which  he  is  able  to 
part  with,  and  the  amount  which  others  are  able  to  oflbi 
him  in  exchange.  Thus,  if  the  crop  of  sUgar  should  be 
reduced  one  half,  there  would  be  a  stagnation  in  the  su^ai 
business ;  that  is,  there  would  be  but  half  the  quantity 
of  sugar  to  be  exchanged,  and  half  the  quantity  of  other 
things  could  be  exchanged  for  it;  in  otlier  words,  half 
the  number  or  amount  of  exchanges  would  be  made. 
And,  in  general,  the  failure  of  any  crop,  or  the  diminu 


J80  STAGNATION     OF    BUSINESS. 

tioii  of  any  kind  of  production,  must  cause  a  stagnaticr. 
of  business  in  that  article  itself,  and  also  in  whatever  is 
usually  exchanged  for  it.  Thus,  also,  if  production  lan- 
guish from  civil  war,  or  from  insecurity  of  properly,  ex- 
changes of  all  kinds  diminish,  towns  are  depopulated, 
harbors  are  deserted,  and  the  accumulated  treasure  of 
past  generations  insensibly  melts  away. 

3.  A  glut,  or  stagnation  of  business,  may  also  arise 
from  comparative  poverty  in  one  of  the  parties  making 
the  exchange.  If  a  nation  is  able  to  produce  but  one 
hundred  thousand  dollars'  worth  of  exports,  it  can  pur- 
chase but  one  hundred  thousand  dollars'  worth  of  im- 
ports. This,  then,  will  generally  be  the  annual  amount 
that  will  be  brought  to  its  market.  But  if,  from  any 
cause,  a  larger  amount,  say  one  hundred  and  fifty  thou- 
sand dollars'  worth,  is 'brought  thither,  there  will  arise  a 
glut,  or  temporary  stagnation  of  business.  There  will 
be  fifty  thousand  dollars'  worth  more  than  can  be  ex- 
changed. The  reason  is  not,  that  they  do  not  want  the 
additional  fifty  thousand  dollars'  worth  of  the  productions 
of  other  countries,  but  that  they  have  nothing  with  whicii 
to  purchase  it.  Hence,  after  one  hundred  thousand  dol- 
lars' worth  have  been  purchased,  there  will  be  sellers, 
but  no  buyers.  It  will  be  seen,  however,  that  such  a 
case  can  generally  exist  only  in  new,  small,  or  in  very, 
unproductive  countries,  or  for  short  periods  ;  or  else 
m  respect  to  articles  of  which  the  consumption  of  the 
whole  community  is  but  small. 

4.  A  stagnation  of  business  may  be  the  effect  of  leg- 
islation. Suppose  the  importation  of  coffee  into  this 
country  be  a  million  pounds  per  annum.  This  must  be 
paid  for,  in  some  way,  by  the  productions  of  our  own 
industry  ;  and  the  demand  for  those  productions  to  this 
extent,  is  for  the  sole  purpose  of  paying  for  this  coffee 
I'here  must,  of  course,  be  a  great  variety  of  exchanges 
required  to  collect  these  products,  to  bring  them  to  the 
seaports,  to  exchange  them  for  coffee,  and  again  to  circu- 
late this  coffee  throughout  the  country.  Now,  let  a  duty 
be  laid  upon  coffee,  which  shall  double  its  price,  and 
thus  diminish  its  consumption  one  half.     The  demand 


LEGISLATIVE     ENACTMENTS.  181 

for  one  half  of  the  products  by  which  it  was  paid  for, 
reases,  the  deiiiand  for  coffee,  to  this  extent,  also  ceas 
es  ;  and  the  labor  of  transportation  on  both  articles  i- 
reduced  one  half.  Here  must  be  a  stagnation  of  biisi 
ness,  in  both  of  these  articles ;  and  half  the  shipping 
thus  employed,  will,  for  a  time,  be  useless.  Hence, 
there  must,  of  course,  arise  a  stagnation  of  business  ; 
that  is,  a  permanent  diminution  of  exchanges,  in  all  the 
departments  of  industry  affected  by  this  arrangement. 
The  same  effect  will  be  produced  by  any  act  of  legisla- 
tion by  which  public  confidence  is  shaken,  the  currency 
disordered,  or  the  facilities  of  exchange  diminished. 

IV.  Of  the  effects  of  legislative  enactments  on  Ex- 
change. 

I  think  it  too  obvious  to  need  remark,  that  duties  on 
imports  cm  have  no  favorable  effect  on  exchange. 
Their  only  effect  must  be,  to  raise  the  price  of  the 
products,  and,  of  course,  to  diminish  the  ability  in  both 
parties  to  exchange.  Every  one  knows  that  the  ex- 
changes between  two  places  are  diminished  by  any  nat- 
ural obstacle  to  communication.  If  a  road  were  so  bad 
that  it  cost  five  dollars  per  hundred  weight  to  transport 
merchandise  between  two  places,  every  one  knows  that 
exchanges  between  these  places  would  be  fewer  than 
they  would  be  if  the  road  were  improved,  so  that  trans- 
portation could  be  effected  for  twenty-five  cents  per  hun- 
dred weight.  Now,  it  makes  no  difference  whether  this 
additional  four  dollars  and  seventy-five  cents  be  the  re- 
sult of  the  badness  of  the  road,  or  of  a  transit  duty  be- 
tween the  two  places.  The  diminution  of  exchange 
which  it  causes,  will  be  precisely  the  same.  In  a  severe 
winter,  our  northern  harbors  are  closed,  for  weeks  or 
months,  by  the  ice.  This  is  a  natural  tariff,  and  imposes  a 
large  protecting  duty,  inasmuch  as  exchanges  must  be  f;f- 
fected,  if  they  be  effected  at  all,  at  a  vastly  greater  price 
than  in  summer.  It  is  not  generally  believed,  that  this  in- 
creases the  number  of  exchanges  ;  nor  have  I  ever  heard 
it  mentioned,  as  favorable  to  domestic  industry. 

I  therefore  think  it  evident,  that  government  cajj  do 
nothing  to  facilitate  exchanges  by  means  of  discrimi- 


182  LEGlSLATrVE    ENACTMENTS. 

nating  duties.     They  have,  however,  attempted  to  ac 
comphsh  this  result,  by  means  of  bounties  on  particuJai" 
exports. 

The  manner  in  which  this  is  accomplished,  is  this. 
Suppose  we  were  not  able,  profitably,  to  produce  anil 
offer  to  other  nations  in  exchange,  some  particular  arti- 
cle, Fay,  for  instance,  iron.  To  encourage  this  export, 
a  bounty  is  granted  on  every  ton  of  iron  exported,  equal 
to  the  difference  between  our  cost  of  producing  it,  and 
that  at  which  other  nations  produce  it.  Our  producer 
can  then  sell  it  in  a  foreign  port,  as  cheap  as  the  pro- 
ducer from  another  nation.  But  where  does  this  bounty 
come  from  ?  Why,  it  is  from  a  duty  laid  on  some  othei 
import,  or  else  from  a  tax  laid  on  some  other  product. 
The  iron  worker  is  no  better  off  than  any  other  man, 
and  all  the  other  exchangers  or  producers,  or  both,  are 
iust  so  much  worse  off;  and  the  value  of  capital  and 
labor  is,  by  the  whole  operation,  diminished,  as  we  have 
shown  in  the  article  on  the  effect  of  legislative  enact- 
ments upon  production.  Did  any  merchant  ever  grow 
rich  by  seUing  under  cost,  for  the  sake  of  competition 
with  his  neighbor .''  It  would  be  very  difficult  to  show 
how  a  nation  can  grow  rich  in  the  same  way.  But,  as 
the  principles,  on  which  this  discussion  depends,  hd\e 
been  already  treated  of  in  the  article  above  alluded  to. 
J  need  not  here  repeat  them. 

If,  then,  governments  can  do  nothing  in  this  manner 
to  promote  the  business  of  exchanges,  in  what  manner 
may  exchange  be  effected  by  legislation  ? 

We  have  said  that  exchanges  are  the  natural  result  of 
mutual  desire  and  mutual  ability.  In  what  manner  may 
these  be  influenced  by  legislative  enactments  ? 

1.  Of  Desire.  If  by  desire  be  meant  the  original 
iuipuljes  implanted  in  the  bosom  of  man,  it  is  evident 
that  these  can  be  neither  increased  nor  diminished. 
These  are  a  fixed  quantity,  with  which  we  cannot  inter- 
fere. These  desires,  however,  generally  remain  dor- 
mant, until  they  are  awakened  into  exercise  by  the  pres- 
ence, or  by  the  knowledge,  of  their  appropriate  objects. 
It  IS  by  a  knowledge  of  the  existence  of  these  objects, 


INTERNAL    IMPROVEMENTS.  183 

therefore,  and  of  the  modes  by  which  they  may  be  ob- 
tained, that  the  desire  for  exchange  is  excited.  Hence, 
it  is  plain,  that  the  desire  for  exchange  may  be  in- 
creased ; 

1.  By  the  general  diffusion  of  knowledge,  especiall) 
of  that  sort  of  knowledge  by  which  man  is  taught  how 
he  may  benefit  his  condition.  This  will  be  accom- 
plished, generally,  by  a  universal  diffusion  of  the  means 
of  common  education. 

2.  By  removing  all  impediments  to  the  diffusion  of 
knowledge.  In  this  respect,  a  duty  on  imported  books, 
which  is  really  a  tax  on  knowledge,  is,  in  a  free  govern- 
ment, exceedingly  injudicious. 

3.  By  increasing  the  physical  means  for  the  dissemi- 
nation of  knowledge  and  intelligence.  This  will  be 
done  by  allowing  every  facility  for  internal  improve- 
ment ;  by  an  efficient  and  cheap  post-office  system,  per- 
vading every  portion  of  the  country,  and  bringing  to 
every  man's  door  the  information  circulating  throughout 
the  civilized  world. 

I  do  not  know  that  a  government  can  do  more  thar 
this  to  excite  in  a  people  the  desire  to  exchange. 

2.  Of  Mility.  The  ability  to  exchange  depends, 
as  we  have  shown,  upon  productiveness.  Hence,  every 
means  by  which  the  productiveness  of  industry  is  in- 
creased, will  also  benefit  exchange.  These  have  al- 
ready been  alluded  to,  in  the  former  book,  and  need  not 
here  to  be  repeated. 

There  is,  however,  one  branch  of  productive  industry 
which  is  more  immediately  connected  with  exchange 
than  any  other,  and  which  deserves,  on  that  account,  m 
ihis  place,  a  more  minute  consideration.  I  refer  tc  in- 
ternal improvements.  On  this,  I  shall  offer  a  few  re- 
marks . 

An  internal  improvement,  is  any  means  by  which  rhe 
operation  of  change  in  place  may  be  performed  at  a  less 
expense  than  formerly.  It  is,  in  fact,  a  labor-saving 
machine,  peculiar  to  this  branch  of  industry.  Of  those 
at  present  in  use,  the  most  common  are  roads,  railways, 
and  canals. 


184  INTERNAL    IMPROVEMENTS. 

What  is  peculiar  to  these  machines,  is,  Mrst,  they  are 
very  costly,  and  hence,  in  general,  require  more  capital 
than  can  be  commanded  by  a  single  individual  ;  and, 
therefore,  must  be  owned  by  a  number  of  persons  asso- 
ciated together.  Secondly  :  they  must  pass  through  the 
lands  of  various  individuals  who  have  no  special  interest 
in  them,  and  are  thus  liable  to  interfere  with  the  right 
of  property.  This  interference  can  be  allowed  only  by 
the  whole  community  ;  and,  hence,  there  arises  a  neces- 
sity for  legislative  enactment,  granting  permission  to  this 
effect. 

Now,  inasmuch  as  such  machines,  if  properly  con- 
structed and  skilfully  managed,  are  greatly  for  the  ben- 
efit, of  the  whole  society,  it  is  manifestly  the  duty  of 
society  to  grant  all  suitable  facilities  for  constructing 
them.  Inasmuch,  however,  as  they,  like  any  other 
privileges,  are  liable  to  be  abused,  and  may,  in  the  end, 
injure  the  interests  which  they  were  intended  to  benefit, 
It  becomes  a  legislature,  on  all  such  occasions,  to  re- 
serve, at  the  outset,  the  right  of  visitation  ;  the  power 
to  modify  or  amend,  on  equitable  terms,  the  privileges 
granted,  in  such  manner,  as  the  exigencies  of  the  public 
may  require. 

Whether  a  government  should  itself  undertake  the 
work  of  internal  improvement,  is,  however,  not  so  clear. 
On  this  subject,  it  may  be  suggested  : 

1 .  If  it  will  not  be  profitable  ;  that  is,  if  capital  thus 
invested  will  not  be  as  productive  as  that  invested  in 
other  employments,  it  ought  not  to  be  undertaken  by  the 
public,  because  the  capital  thus  invested  must  be  taken 
from  other  employments  ;  that  is,  it  must  be  taken  from 
a  more  productive,  to  be  invested  in  a  less  productive 
employment.  If  it  be  said,  though  it  be  not  itself  pro- 
ductive, it  may  enrich  the  district  in  which  it  is  con- 
structed ;  the  answer  to  this  is,  then  let  that  district  pay 
for  it,  unless  it  can  be  shown  to  be  either  wise  or  just, 
to  Impoverish  one  district,  for  the  purpose  of  enrichmg 
another. 

2.  If  it  will  be  productive,  private  associations,  in  an 
mielligent  community,  will,  with  proper  encouragement, 


INTERNAL    IMPROVEMENTS,  l86 

be  ready  to  undertake  it.  And  of  the  question  of  prof- 
itableness, private  individuals  will  judge  much  more  ac- 
curately than  a  government,  because  the  facts  are  equal- 
ly known  to  both  ;  the  degree  of  intelligence  is  likely  to 
be  as  great  in  the  one  case  as  in  the  other  ;  and  the  one 
party  can  be  influenced  by  no  motive  but  self-interest, 
which  is  here  also  the  interest  of  the  public  ;  while  the 
other  party  may  be  influenced  by  party  poHiics,  section- 
al jealousy,  love  of  power,  and  a  thousand,  disturbing 
causes. 

3.  A  work  of  this  sort  will  be  executed  at  much  less 
expense  by  private  individuals,  than  by  a  government. 
The  costliness  of  all  public  works  is  everywhere  pro- 
verbial. The  greater  the  number  of  intermediate  agen- 
cies by  which  any  work  is  performed,  the  more  imper- 
fectly is  the  work  done,  and  the  greater  is  the  unneces- 
sary expenditure.  Now,  government  is  itself  an  agent. 
It  must  perform  the  work  by  means  of  another  set  of 
agents.  Under  these  may  be  half  a  dozen  others,  in  the 
form  of  contractors,  and  sub-contractors.  All  these  un- 
necessary agencies  must  be  paid  out  of  the  pubhc  purse, 
and  their  accounts  adjusted  by  those  who  have  no  spe- 
cial motive  to  encourage  economy.  All  this  is  reversed, 
when  those,  who  conduct  the  work,  pay  for  it  them- 
selves, and  whose  profits,  in  the  end,  must  depend  upon 
the  goodness  of  the  work,  and  the  cheapness  of  its  ex- 
ecution. 

4.  A  work  of  this  kind,  when  completed,  will  be 
more  faithfully  superintended  by  private,  than  by  pub- 
lic owners.  The  private  owner  knows  that  he  mu?t 
conduct  his  operation  economically,  and  maintain  the 
favor  of  the  public,  or  else  he  will  gain  nothing  by  his 
investment.  A  government  is  under  no  such  salutar) 
check. 

5.  But  a  still  stronger  objection  to  the  confiding  oi" 
such  works  to  the  public,  is,  the  amount  of  patronage 
which  it  must,  of  necessity,  place  in  the  hands  of  a  gov- 
ernment. The  power  to  make  roads  and  canals  when- 
ever it  pleased,  and  to  employ  upon  them  whomsoever 
It  pleased,  once  placed  in  the  hands  of  a  party,  would 

16* 


186  1NTER>'AL    IMPROVEME^TS. 

perpetuate  it  in  oflice  forever,  in  spite  of  any  violation 
of  right  which  it  might  perpetrate,  or  any  corruption  of 
which  it  migh*.  be  guilty.  There  is  too  much  reason  to 
fear,  that  a  large  portion  of  tlie  investment  in  internal 
improvement  made  by  our  State  authorities  will  prove  an 
almost  total  loss. 

For  these  reasons,  it  seems  to  me  that  the  safer  rule 
would  be  to  leave  works  of  this  kind  to  be  executed  by 
private  corporations.  This,  however,  is  a  general,  and 
not  an  universal  rule.  Works  may  be  of  such  magni- 
tude, or  iney  may  be  of  so  great  national  ijnportance, 
that  the}  must  be  executed  and  controlled  by  the  public 
at  large.  These  cases  are,  however,  I  apprehend,  the 
exceptions.     The  lule  I  suppose  to  be  as  above  stated. 

There  are,  however,  other  improvements,  of  very  great 
importance,  the  superintendence  of  which  belongs,  of 
necessity,  to  a  government  ;  it  is  that  class  of  improve- 
ments which  reduce  the  expense,  and  lessen  the  risk  of 
exte7-nal  commerce.  Among  these,  the  most  important 
ire  the  removal  of  obstructions  from  harbors ;  the  loca- 
tion of  buoys  and  the  erection  of  light-houses  ;  the  ex- 
ecution of  accurate  surveys  ;  and  the  publication  of  ac- 
curate charts  of  the  whole  coast  of  a  country.  The 
more  perfect  these  become,  the  less  is  the  risk  of  ship- 
wreck, in  leaving  and  approaching  a  coast  ;  of  course, 
the  less  is  the  cost  of  insurance,  and  the  less  the  prict 
of  every  thing  imported  and  exported.  Hence,  a  nation, 
offering  these  advantages,  becomes  a  better  market  fot 
all  other  nations,  and  they  will  the  more  readily  resort  to 
her  for  exchanges.  Improvements  of  this  sort  are  one 
of  the  most  economical  forms  of  national  investment ; 
they  frequently  save,  in  a  single  year,  the  whole  cost  of 
their  erection.  The  loss  of  property  and  hfe,  by  ship- 
wreck, on  almost  every  coast,  is  enormous.  The  great- 
er par  of  this  loss  might  probably  be  saved,  by  judicious 
expenditure  upon  improvements  on  the  coast,  and  proper 
regulations  for  the  government  of  pilots. 

3.  I  have  said,  above,  that  exchanges  will^be  effected 
by  the  security  or  insecurity  of  the  right  of  property. 
Fience,  legislators  can  do  much  to  promote  the  prosper* 


TREATMENT    OF    FOREIGNERS  187 

ity  of  a  country,  by  the  enactment  of  wholesome  laws, 
by  which  contracts  shall  be  enforced,  wrongs  redressed, 
and  injuries  prevented.  And  tb*^y  sho'iM  be  specially 
careful  that  they  are  not  guilty,  in  their  social  chara(Mer, 
of  what  they  forbid  to  others  in  their  individual  charac- 
ter. Tliey  should  be  scrupulous  in  the  observance  oi 
individual  right,  and  should  remember,  that  a  single  in- 
dividual is  as  important  as  a  nation,  when  the  question 
of  justice  is  concerned. 

And  the  same  principles  apply  to  the  treatment  of 
foreigners.  No  foreigner  can  traffic  with  another  coun- 
try, without  placing  his  property  in  the  power  of  the  cit- 
izens of  that  country.  If  his  rights  be  respected,  and 
he  be  assured  of  the  benefit  of  equal  laws,  he  will  invest 
his  properly  abroad  as  freely  as  at  home  ;  and  will,  with 
confidence,  and  on  the  most  moderate  terms,  effect  ex- 
changes to  as  great  an  extent  as  he  is  able.  Hence, 
under  these  circumstances,  exchanges  will  be  effected 
to  the  greatest  advantage  of  both  countries,  and  they 
will  naturally  flow  from  other  countries  to  such  an  one  as 
this.  And  the  reverse  will  be  the  case,  if  the  rights  of 
foreigners  are  disregarded.  Other  nations  will  desire 
their  custom,  if  we  do  not.  Commerce  will  leave  our 
shores,  and  we  shall  be  left  in  the  well-known  condition 
of  the  dog  in  the  manger.  The  fable,  I  believe,  inforitis 
us  tlial  he  was  starved  to  death. 


CHAPTER  SECOND. 

or  EXCHANGE  BY  MEANS  OF  A  METALLIC  CURRENCY 


SECTION  I. 

OF    THE    USE    OF    A    CIRCULATING    MEDIUM. 

In  the  preceding  chapter,  I  have  endeavored  to  iUm- 
Irate  the  general  principles  of  exchange,  and  the  condi- 
tions by  which  it  is  regulated.  Exchange,  however, 
I'ke  every  other  benefit  which  we  enjoy  in  this  hfe,  can 
only  be  accomplished  by  labor.  But  in  this,  as  in  ev- 
ery other  case,  it  holds  true,  that  a  great  advantage  is 
gained  by  increasing  the  productiveness  of  labor  ;  that 
is,  by  enabling  the  same  individuals,  by  the  same  labor, 
to  accompUsh  a  greater  amount  of  exchange.  And  it 
holds  true  in  this,  as  in  other  cases,  that  the  result  of 
labor  is  more  perfect,  "just  in  proportion  as  the  produc 
liveness  of  labor  is  increased. 

But  in  order  to  accomplish  this,  an  intermediate  in- 
strument or  tool  must  be  used.  A  man  who  cannot 
split  a  log  by  the  direct  use  of  his  hands,  will  find  no 
difficulty  in  splitting  it  with  a  beetle  and  wedges.  So, 
also,  he  who  would  find  it  impossible  to  effect  a  dozen 
exchanges  in  a  day,  if  he  insisted  on  exchanging  the 
products  themselves,  will  find  no  difficulty  in  doing  it  in 
a  few  minutes,  by  means  of  the  instrument  which  has 
been  invented  for  this  purpose,  and  he  will  not  only  thus 
do  it  in  a  shorter  time,  but  also  on  better  terms,  and 
with  much  gi eater  exactitude. 

This  instrument,  of  so  much  importance  in  exchange 
is  money ;  to  a  consideration  of  the  nature  and  uses  o( 
which,  we  shall  devote  this  and  the  succeeding  chapters 
The  present  chapter  will  be  confined  to  the  conoMers 


DIFFICULTIES    OF      EXCHANGE    IN    KIND.         189 

lion  of  a  metcJlic  currency.  We  corninence  with  llie 
use  of  a  circulating  medium. 

In  treating  of  this  subject,  ue  shall  Jirst  consider  the 
difficulties  which  must  necessarily  embarrass  exchange 
in  kind;  and,  secondly.^  the  manner  in  which  these  diffi- 
culties are  removed  by  means  of  a  circulating  medium. 

1.  The  difficulties  which  attend  vpcii  exchange  in 
kind 

By  exchange  in  kind,  I  mean  exchange  of  commodity 
for  commodity,  as  when  a  farmer  exchanges  wheat  for 
sugar,  or  pork  for  iron,  &c. 

1.  Suppose  a  producer  to  have  prepared  his  product 
for  consumption.  If  he  be  obliged  to  exchange  in  kind, 
it  may  be  a  long  time  before  he  finds  another,  person 
who  desires  the  article  which  he  has  created.  lY  he  be 
obliged  to  wait  long,  his  product,  if  perishable,  will  be 
either  destroyed  or  deteriorated.  He  must  go  in  search 
of  a  purchaser  ;  and  if  he  at  length  find  one,  he  may 
have  consumed,  in  the  search,  as  much  lime  as  the  arti- 
cle originally  cost.  This  must  be  added  to  the  cost  of 
the  article,  or  else  he  will  be  a  loser.  But,  by  this 
additional  cost,  the  product  is  no  better  ;  it  is  only  dear- 
er. This  must,  of  course,  decrease  the  demand  ;  and 
hence,  by  all  this  additional  cost,  both  parties  are  poorer. . 

2.  But  it  is  to  be  remembered,  that  the  producer  not 
only  wants  to  part  with  his  product,  but  also  to  part  with 
it  for  some  definite  object  of  desire.  He  who  has  rais- 
ed wheat,  does  not  wish  simply  to  part  with  his  wheat, 
but  also  to  receive  in  exchange  for  it,  tea,  or  coffee,  or 
iron,  or  salt,  or  clothing.  He  must,  therefore,  in  order 
to  effect  the  exchange  which  he  desires,  not  only  find 
some  one  who  wishes  for  wheat,  but  also  some  one  who 
is  able  to  give  him,  in  return,  the  precise  product  he 
desires.  If  he  desire  clothing  in  reHirn,  it  will  not  be 
sufficient  to  find  some  one  who  offers  him  bread,  or 
shoes,  or  butcher's  meat  This,  also,  increases  the  dif- 
ficulty of  exchange,  and,  of  course,  the  labor  and  the 
cost  necessary  to  effect  it. 

3.  But  this  is  not  aH.  Men  who  wish  to  exchange, 
do  nol  always  wish  lo  exchange  in   equal   amounts.     A 


(90         DIFFICULTIES    OF    EXCHANGE    IN    KIND. 

grazier  who  brings  a  failed  ox  lo  market,  may  find  per 
sons  enough  who  want  a  few  pounds  of  beef,  but  very 
few  who  want  a  whole  ox.  The  grazier  cannot  divide 
his  ox,  and  give  a  part  of  it  for  a  few  pounds  of  coffee 
or  lea  ;  nor,  probably,  does  he  require  one  fourth  of  the 
value  of  the  ox,  in  any  article  which  can  be  purchased 
in  the  town  where  it  may  be  sold.  He  wishes  to  obtain, 
by  the  sale  of  the  ox,  additional  provender  for  the  sup- 
port of  his  remaining  herd.  This  he  cannot,  perhaps, 
procure,  except  in  the  country  ;  or  if  he  could  procure 
it,  the  merchant  who  owns  the  provender,  would  not 
want  a  whole  ox  for  butcher's  meat.  Thus,  exchanges 
would  be  arrested  ;  or  must  be  made  very  rarely,  and  at 
great  cost,  and  under  every  possible  disadvantage. 

4.  Such  are  the  difficulties  which  attend  upon  the 
exchange  of  material  products.  But  it  will  be  manifest, 
at  once,  that  material  products  give  rise  to  but  a  small 
part  of  the  exchanges  which  are,  by  necessity,  made 
among  men.  One  great  article  to  be  exchanged  is  labor. 
This  every  man  produces,  and  must  produce,  by  the 
law  of  his  nature  ;  and  this,  every  man  is  able  lo  offer 
in  exchange  for  the  objects  of  desire.  Now,  were  ex- 
change only  in  kind,  a  man  who  had  nothing  but  labor 
or  skill  to  offer,  would  not  be  able  to  labor  for  those 
who  desired  his  labor  and  who  would  give  him  the  great- 
est wages  for  it  ;  but  he  must  labor  for  those  who  were 
willing  lo  give,  in  ever  so  small  quantity,  the  articles 
which  he  needed  for  his  support.  The  laborer  in  an 
iron-foundry  would  be  obliged  to  take  his  pay  in  iron. 
But,  as  he  could  not  exchange  his  iron  with  the  baker, 
I  he  butcher,  or  the  clothier,  he  must  go  and  work  for 
these  producers,  for  any  compensation  by  which  he 
might  obtain  for  himself  the  necessaries  of  life.  The 
workman  of  the  baker  must  take  his  pay  in  bread.  But 
he  would  want  only  a  small  portion  of  bread  for  himself, 
and  he  must  spend  his  time  in  exchanging  it  for  -what- 
ever else  he  needed.  If  he  could  not  thus  procure  tea, 
coffee,  clothing,  and  other  necessaries,  he  must  leave 
his  occupation,  and  work  for  those  who  wished  to  ex- 
change them  for  his  labor.      The  physician  must  take  his 


UTILITY    OF     A    CIRCULATING    MEDIUM.  !51 

fee  in  iron,  or  bread,  or  butcher's  meat  ;  and  if  any  of 
his  patients  produced  what  he  did  not  want,  he  must  ei- 
ther attend  them  gratuitously,  or  they  must  die  without 
assistance.  Besides  this,  there  are  many  products  in- 
capable of  division.  If  a  hundred  men  engaged  in 
building  a  ship  or  a  house,  how  would  they  take  their 
pay  in  kind,  without  taking  the  ship  in  pieces,  and  thtis 
rendering  their  work  wholly  useless  .'' 

5.  Hence,  were  exchange  only  in  kind,  there  woul  I 
be  no  division  of  labor,  except  in  its  most  imperfect 
form.  No  man  could  perfect  himself  in  any  one  art  ; 
because,  by  the  exercise  of  that  alone,  he  could  not 
possibly  procure  the  means  of  sustenance.  I  have  al- 
ready shown,  how  impossible  it  would  be  for  him  to  do 
this  by  the  practice  of  any  one  of  the  ordinary  mechan- 
ical trades.  How  much  more,  when  these  trades  are 
minutely  subdivided.  I  have  elsewhere  stated  the  ad- 
vantages of  this  subdivision.  But  how  could  this  be 
effected,  if  exchange  were  made  only  in  kind  ?  Sup- 
pose a  man  employs  his  time  in  the  single  process  of 
heading  pins,  or  in  forming  the  rivets  for  the  bandies  oi 
pen-knives  ;  how  could  he  subsist  by  exchange  in  kind 
Who  would  give  him  what  he  needed  for  subsistence 
for  his  pin-heads,  or  for  his  knife-handle  rivets  .'*  Hence, 
division  of  labor,  so  essential  to  the  productiveness  of 
human  industry,  to  the  progress  of  society,  and  to  the 
use  of  natural  agents,  could  exist  only  in  its  most  ele- 
mentary forms,  were  exchange  limited  in  the  manner  we 
have  supposed. 

And,  if  it  be  said  that  this  inconvenience  coi  Id  be 
avoided  by  establishments  for  barter,  it  will  at  once  ap 
pear  that  these  could  remedy  it  only  in  part.  They 
could  assist  in  the  exchange  of  nothing  but  material  prod- 
ucts, and  of  those  which  wete  not  rapidly  perishable. 
They  could  present  no  relief  for  exchanges  of  labor. 
Hence,  they  would  do  almost  nothing  to  facilitate  divis- 
ion of  labor,  and  could  carry  forward  the  [)rogress  of  so- 
ciety irj  no  respect  beyond  its  most  rude  beginnings. 

Frou)  such  causes  as  these,  arises  the  necessity  of  a 
circulating  medium  ;  and  it  will  be  easily  seen,  in  what 


192  UTILITY    OF    A    CIRCULATING    MEDIUM. 

manner,    by   means  of  a  circulating   medium,   they  art 
remedied. 

1.  Suppose  that  the  producer  can  always  exchange 
his  product,  not  for  the  article  which  he  immediately 
wants,  but  for  some  other  article  which  is  universally 
wanted,  and  wanted  at  all  times,  and  in  all  quantities. 
As  soon  as  the  producer  has,  by  exchange,  possessed 
himself  of  this  commodity,  he  may  then,  on  account  of 
its  universal  desirableness,  easily  procure,  by  another 
exchange,  whatever  he  may  need.  In  this  jmanner,  by 
means  of  two  exchanges  made  at  the  same  instant,  the 
labor  of  days  or  of  weeks  may  be  accomplished.  Thus, 
if  salt  were  this  commodity,  and  every  one  wanted  salt 
in  all  quantities,  at  all  times,  and  at  a  fixed  value  ;  by 
exchanging  every  thing  for  salt,  and  then  exchanging  salt 
for  whatever  we  might  desire,  the  labor  of  exchanges 
would  be  vastly  diminished. 

2.  This  convenience,  however,  will  be  much  increas- 
ed, if  the  article  of  universal  desire  be  small  in  bulk  ; 
because,  in  this  case,  much  of  the  labor  of  transporta- 
tion will  be  avoided.  Were  the  lace-maker  obliged  lo 
exchange  his  lace  for  salt,  he  would  be  obliged  to  fur- 
nish himself  with  a  cart,  in  which  to  receive  his  pay- 
ment. And  thus,  in  general,  instead  of  a  purse,  in 
which  to  carry  our  money,  we  should  require,  for  this 
purpose,  the  use  of  a  wagon  and  horses. 

3.  If  this  circulating  medium  be  also  minutely  divisi- 
ble, it  will  possess  still  greater  conveniences.  The 
producer  may  then  part  with  all,  or  with  a  part  o  his 
product  ;  and  he  can  procure,  with  a  circulating  me- 
dium, as  small  a  portion  of  that  which  he  wishes  in  ex 
change,  as  he  may  choose.  The  farmer,  instead  ol 
exchanging  one  part  of  his  wheat  for  tea,  another  pait 
for  coffee,  and  another  part  for  clothing  ;  or  else,  ex- 
changing it  all  for  tea,  and  then  endeavoring  to  find  cus- 
tomers for  his  tea,  may  exchange  it  all  for  the  circulat- 
ing medium,  procure  as  much  of  each  as  he  pleases,  or, 
if  he  choose,  make  no  further  exchange  whatever. 

4.  The  case  is  still  stronger,  when  laiur  is  one  of 
the  articles  fo  be  exchanged.      The  laborer  will  now  nc 


UTILITY    OF    A    CIRCULATING    i.IEUIUM.  193 

longer  be  obliged  to  labor  at  any  price,  for  him  who  is 
al)le  to  give  him  in  exchange  what  he  immediately 
wants  ;  but  he  may  labor  for  any  one  who  will  give  him, 
in  return,  this  object  of  general  desire.  Hence,  he  is 
now  at  liberty  to  labor  for  him  who  will  give  him  the 
he3t  wages  ;  that  is,  where  his  industry  and  skill  will  be 
enjployed  most  advantageously  to  himself.  With  this 
he  can  procure  whatever  he  wants,  in  such  portions  as 
he  may  desire. 

5.  The  j)racticability  of  the  division  of  labor  now 
becomes  immediately  apparent.  If  the  laborer  be  paid 
in  the  article  of  universal  desire,  it  makes  no  difference 
whether  the  person  who  produces  what  he  wants,  needs 
or  does  not  need,  his  particular  product.  He  wants  the 
object  of  universal  desire,  and  this  is  enough  ;  for,  by 
this,  the  laborer  can  effect  exchanges  with  him  or  with 
any  one  else.  If  he  can  procure  this  circulating  me- 
dium by  means  of  pin-heads,  or  knife-handle  rivets,  this  is 
ail  that  he  wants.  He  is  now  as  independent  as  though 
he  produced  that  which  every  one  wants  ;  since,  by 
means  of  what  he  produces,  he  can  procure  that  which 
every  one  wants.  Thus,  we  see,  that  every  man  is,  in 
this  manner,  able  to  devote  himself  to  that  in  which  his 
skill  will  be  most  productive  to  himself.  And  all  men 
thus  making  the  first  exchange  in  this  object  of  universal 
desire,  all  are  equally  independent  ;  and  all  are  able,  in 
the  most  successful  manner,  to  avail  themselves  of  the 
fruits  of  their  own  industry. 

Now,  whatever  ]t  is  that  performs  the  office  of  thus 
facilitating  exchanges,  is  called  a  circulating  medium. 
So  great  has  been  the  necessity  of  some  such  instru- 
ment, that  'even  the  rudest  nations  have  always  been 
found  adopting  some  such  contrivance  with  advantage. 

Thus,  the  natives  of  the  African  coSst  were  formerly 
ill  the  habit  of  using,  as  money,  small  white  sea-shells, 
denominated  cowries. 

In  pastoral  nations,  cattle  were  frequently  used  as  8 
circulating  medium.  Thus  we  are  told,  by  Homer,  that 
fh»  amor  o(  Diomode  cost  nine  oxen.  Sheep,  proba- 
bly, w  !re  also  used  for  the  same  purftose.      The  ordi- 


194  UTILITY    OF    A    CIRCULATING    laEOIUM 

nary  mode,  among  such  nations,  of  estimating  the  tveahii 
of  an  individual,  was  by  the  number  of  his  flocks  and 
herds.  Hence,  probably,  arose  the  custom,  among  the 
Greeks  and  Romans,  of  stamping  their  earliest  coin  with 
the  figure  of  an  ox  or  a  sheep.  Hence,  also,  the  Latin 
word  pecunia^  money,  is  supposed  to  be  derived  from 
pfcrw,  a  sheep. 

From  reasons  which  will  easily  suggest  themselves, 
all  other  substances  sooi:  gave  place  to  the  metalj,  as  a 
circulating  medium.  Different  metals  were,  however, 
used  at  first  by  diflferent  nations.  The  first  instance  on 
record,  of  the  use  of  metals,  as  a  medium  of  exchange, 
is  found  in  Genesis  23  :  16.  "And  Abraham  heark- 
ened unto  Ephron.  And  Abraham  weighed  to  Ephron 
the  silver  which  he  had  named,  in  the  audience  of  the 
sons  of  Heth,  four  hundred  shekels  of  silver,  current 
money  with  the  merchant."  We  see  that  at  this  time 
the  money  was  weighed  ;  that  is,  was  not  paid  by  tale. 
I  presume  that  the  metals  were  used  as  a  circulating 
medium' for  a  long  period  before  they  were  fashioned 
into  coin.  At  a  much  later  period,  the  baser  metals 
were  used  as  money  by  the  Greeks  and  Ron)ans.  Thus 
the  Lacedemonians,  under  Lycurgus,  established  iron 
as  the  circulating  medium.  The  Romans  used  copper 
or  brass  in  the  early  ages  of  their  history.  Hence,  ces 
signifies,  in  Latin,  both  brass  and  money.  These,  how- 
ever, in  all  places,  have  long  since  given  place  to  gold 
and  silver,  which  are  hence  denominated  the  precious 
metals.  These  are  now  used  fqr  the  purposes  of 
money,  throughout  the  known  world,  except  among  the 
nidest  and  most  barbarous  tribes.  Copper  is  used  only 
in  the  payment  of  sums  less  in  value  than  the  lowest 
denommation  of  silver  coin.  In  some  countries,  both 
gold  and  silver  are  made  a  legal  tender  in  payment 
of  debts  ;  in  other  countries,  only  one  of  these  metals  is 
used.  In  this  country,  both  are  thus  established  by 
law.  In  Great  Britain,  gold  is  the  only  legal  tender  foi 
all  sums  greater  than  twenty  shillings,  and  silver  for  aft 
sums  of  less  amount.  Copper  is  used  onl\  in  pajme.U 
of  sums  less  than  sixpence. 


QUALITIES    OF    A    CIRCULATING    MEDIUM.        195 


SECTION  II. 

OF     THE      QUALITIES     NECESSARY     TO     THAT     WHICH 
CONSTITUTES    THE    CIRCULATING    MEDIUM. 

In  order  to  render  any  substance  available  as  a  circu- 
lating medium,  the  essential  quality  required  is,  that  it 
be  universally  desired  as  such.  Its  object  is  to  facili- 
tate exchanges,  but  it  can  accomplish  this  object,  only 
by  means  of  the  willingness  of  the  whole  community  to 
exchange  for  it  every  thing  which  they  are  willing  to 
part  with.  If  one  individual  of  a  community  prefer  one 
substance,  and  another  individual  another,  exchanges 
will  be  embarrassed,  by  unnecessary  multiplication,  and 
by  the  useless  consumption  of  time.  And  if,  on  the 
other  hand,  any  substance  be  thus  universally  desired  ; 
on  account  of  the  great  facilities  which  it  offers,  and  the 
great  saving  of  labor  which  it  effects,  it  will  be  immedi- 
ately used  for  this  purpose.  And  it  will  be  so  used, 
without  any  agency  of  government  ;  and  even  although 
a  government  did  not  exist ;  just  as  a  man  will  use  any 
other  instrument  for  increasing  the  productiveness  of  his 
labor  as  soon  as  he  can  procure  it  ;  simply  for  the  rea- 
son that  it  is  for  his  advantage. 

If  the  exchanges  of  a  country  were  wholly  internal,  it 
would  be  sufficient  that  such  a  circulating  medium  were 
universally  acceptable  in  that  country  alone.  But,  inas- 
much as  every  nation  has  important  and  extensive  ex- 
changes with  other  nations,  it  is  an  additional  advantage 
to  have  the  same  substance  used  as  a  circulating  medium 
by  all.  We  have  already  seen,  that  that  exchange  is 
the  most  profitable  for  a  country,  in  which  it  exports 
what  is  relatively  most  abundant  at  home,  and  imports 
that  which  is  relatively  most  wanted  at  home  ;  and  im- 
ports it  from  that  country  in  which,  what  it  exports  is 
most  wanted,  and  what  it  imports  is  most  abundant. 
Now,  it  is  evident,  that  the  circulating  medium  may  b«j 
accnniil&ted  in  any  country,  so  that  it  shall  be  relatively 
lower  in  price  than  other  commodities.     Thu.s,  'he  pre- 


195        QUALITIES    OP    A    CIRCULATING    MEDIUM. 

cious  metals  may  be  so  abundant  in  this  country,  that  a 
merchant  can  procure  more  iron  in  Russia  by  sending  a 
given  amount  of  silver,  than  by  sending  the  flour  which 
would  here  be  equal  in  value  to  tJie  silver.  It  is,  there- 
fore, for  his  advantage  to  send  the  silver,  and  it  is 
equally  for  the  advantage  of  his  countryT  And,  for  the 
same  reason,  if  in  this  country  there  be  a  relative  scar- 
city, it  will  be  for  the  advantage  of  other  nations,  as 
well  as  for  our  advantage,  that  they  should  send  silver  in 
exchange  for  our  products.  In  this  manner,  exchanges 
are  made,  of  that  which  is  least  wanted  by  both  parties, 
for  that  which  is  most  wanted  by  both.  This  enables 
both  parties  to  supply  themselves  at  the  lowest  rates. 

Besides,  it  is  very  desirable  that  the  value  of  the 
circulating  medium,  be  as  little  as  possible  liable  to  fluc- 
tuation. Now  if  the  same  substances  be  used  in  all  tlie 
civilized  world,  this  fluctuation,  if  not  absolutely  pre- 
vented, will  be  so  restricted,  as  to  produce  the  least 
possible  amount  of  evil.  When  exchanges  between 
countries  are  frequent  and  numerous,  and  the  prices  of 
all  commodities  are  universally  known  by  the  merchants 
of  both,  as  specie  may  be  sent  abroad  with  very  little 
cost  of  transportation,  a  very  slight  advance  in  its  rela- 
tive value  will  cause  it  to  flow  in  from  other  countries, 
and  a  very  slight  surplus  will  cause  it  to  flow  to  other 
countries,  until  the  common  equilibrium  be  restored.  Tn 
this,  we  see  in  what  manner  the  universal  employment 
of  the  same  substances,  by  all  nations  holding  intercourse 
with  each  other,  will  be  an  advantage  to  all  ;  inasmuch 
as  it  will  prevent  any  great  fluctuation  in  their  relative 
value  in  any  particular  xjouniry. 

While,  however,  it  is  the  fact,  that  any  thing  which  is 
thus  universally  acceptable  will  be  used  as  money,  there 
are  various  circumstances  on  which  this  acceptableness 
depends.     Some  of  these  are  the  following  : 

1.  Its  cost,  or,  in  other  words,  the  amount  of  labor 
necessary  to  its  production,  must  be  as  invariable  as  pos- 
sible. Hence,  it  could  not  be  a  vegetable  product,  be- 
cause the  variations  in  the  productiveness  of  labor  thus 
employed  are  very  great.     An  abundant  harvest  pro- 


QUALITIES    OF    A    CIRCULATING    MEDIUM.         197 

duces  a  rapid  fall,  and  a  famine  produces  a  rapid  rise,  in 
the  price  of  wheat.  On  this  account,  a  metal  is  prefer- 
able  ;  because,  here  the  amount  produced  is  directly  and 
immediately  dependent  on  the  labor  employed  in  produc- 
ing it,  and  is  less  liable  to  be  influenced  by  disturbing 
forces. 

2.  It  should  be  an  article  of  high  price  ;  that  is,  with- 
in a  small  bulk,  it  should  concentrate  a  large  amount  of 
value,  or  represent  a  large  amount  of  labor.  This  is, 
of  course,  a  great  advantage,  by  saving  the  labor  of 
transportation.  Every  one  sees  that  the  commerce  of 
the  world,  at  its  present  state,  must  instantly  cease,  if 
we  were  obliged  to  exchange  our  gold  and  silver  for  the 
iron  money  of  Lycurgus. 

Yet,  to  this  remark  there  is  a  limit.  As  a  substance 
may  not  be' of  a  price  sufficiently  high,  so  it  may  also  be 
of  a  price  too  high  for  the  purposes  of  money.  Pre- 
cious stones  are  minerals,  and  they  cost  all  the  price  at 
which  they  are  sold  ;  but  they  are  too  dear  to  be  used 
for  this  purpose  ;  that  is,  though  they  might  answer  for 
•.he  exchange  of  great  values,  yet,  for  all  common  ex- 
changes, they  would  be  utterly  unsuitable,  because  they 
would  be  of  so  small  bulk,  as  to  be  very  easily  lost. 

3.  The  substance  must  be  capable  of  division,  with 
out  loss  of  value.  As  it  is  desirable  that  provision  be 
made  for  facilitating  all  sorts  of  exchanges,  the  uObstance 
used  as  money,  should  be  capable  of  division  into  such 
portions  as  may  suit  the  convenience  of  every  one,  with- 
out itself  suffering,  by  this  division,  any  diminution  of 
\alue.  On  this  account,  also,  the  precious  stones  would 
be  unsuitable  for  this  purpose,  because  their  value  is  nut 
proportional  to  their  size.  A  large  diamond  is  worth 
several  times  its  weight  of  small  diamonds.  If  it  bo 
divided,  its  value  is  very  greatly  diminished  ;  and  hav- 
ing been  once  divided,  its  value  can  never  be  restored. 
On  the  contrary,  a  lump  of  gold  may  be  divided  into  oni' 
hundred  pieces,  and  the  value  of  all  the  pieces  together, 
s  equal  to  the  original  value  of  the  whole.  They  may, 
if  occasion  require,  be  again  united  into  one  lump,  aiiJ 
the  value  of  the  whole  is  the  same  as  before. 

17* 


198        QUALITIES    OF   A    CIRCULATING    MEDIUM. 

4.  The  substance  should  be  of  such  a  nature,  that  il 
can  be  easily  verified  ;  tiiat  is,  it  should  be  susceptible 
of  such  preparation,  that  every  one  can  readily  assure 
himself  of  its  purity  and  weight ;  that  is,  of  its  value. 
Unless  this  can  be  done,  at  every  exchange,  every  one 
must  examine  and  try  every  piece  by  itself.  This  would 
consume  much  time,  would  require  the  possession  of 
great  skill  in  every  individual,  and  would,  by  its  frequent 
repetition,  soon  wear  away  the  substance  itself.  Hence, 
it  is  of  advantage  that  the  metals  used  for  money  should 
be  peculiar  in  their  weight  and  color,  and  that  their  ap- 
pearance should  attract  attention,  so  that  their  peculiari- 
ties may  be  easily  learned  and  distinguished.  The  bril- 
liant lustre  of  silver  and  gold,  therefore,  adds  very  much 
to  their  fitness  for  coin.  Their  weight,  also,  presents  a 
ready  means  for  the  detection  of  adulteration.  Plaiina, 
which  is  used  in  Russia  for  the  purpose  of  money,  has 
the  advantage  of  both  of  them  in  weight ;  but  it  has  no 
lustre,  and,  in  appearance,  it  very  much  resembles  the 
baser  metals.  This  will  be  an  objection  to  its  universal 
acceptableness. 

5.  It  should  be  as  little  as  possible  liable  to  decay. 
Were  it  easily  destructible,  great  losses  would  constanily 
occur  ;  as  the  loss  must  fall  upon  the  individual  in  whose 
hands  it  happened  at  the  time  to  be.  And  besides,  it 
would  be  from  this  cause  liable  to  so  great  fluctuation  in 
value,  that  it  could  never  be  used  as  a  circulating  medi- 
um. Were  fish  or  wheat  the  circulating  medium,  since 
both  are  liable  to  rapid  decay,  a  change  of  weather  might 
frequently  ruin  a  man.  No  one  would  exchange,  at  such 
hazards,  for  the  circulating^  medium,  and  all  exchange 
would  be  made  in  kind.  Could  the  circulating  medium 
always  bear  the  same  relative  price  to  other  commodilies, 
it  would  probably  be  advantageous.  But  as  this  is  im- 
possible, it  is  manifest,  that  that  commodity  which  is 
liable  to  the  least  fluctuation,  is,  by  this  circumstance, 
the  best  adapted  to  this  purpose. 

6.  As  we  sometimes  desire  to  make  small  and  some- 
times large  exchanges  ;  and,  as  the  substance  best  adapt- 
ed to  the  one  is  not  always  best  adapted  to  the  other, 


QUALITIES    OF    A    CIRCULATING    MEDIUM.         199 

there  IS  an  advantage  in  employing  two  metals  for  this 
purpose.  For  this  reason,  both  silver  and  gold  are  com- 
monly employed  in  most  civilized  countries.  For  ex- 
changes of  less  value  than  the  smallest  silver  coin,  copper 
is  also  gejjerally  used.  And,  if  silver  should  ever  be- 
come so  abundant  and  cheap  as  to  be  too  bulky  to  be 
used  for  effecting  small  exchanges,  it  would  take  the 
place  of  copper,  and  its  place  would  be  supplied  by 
gold.  Should  gold  become  as  abundant  as  silver,  it 
woulJ  take  the  place  of  silver  and  some  dearer  metal,  as 
platina  would  be  used  in  its  stead. 

Inasmuch  as  gold  and  silver  possess  all  the  essential 
qualities  which  are  required  in  a  circulating  medium  ; 
and  as  the  condition  of  man  so  manifestly  points  to  the 
necessity  of  some  such  instrument,  it  is  not  remarkable 
that  they  have  so  long  and  so  universally  been  adopted 
for  this  purpose.  But  it  is  always  to  be  remembered, 
that  we  use  them  as  a  circulating  medium,  because  we 
loant  a  circulating  medium^  and  because  they  accomplish 
the  purpose.  We  do  not  use  them  as  a  circulating  me- 
dium, because  we  see  a  stamp  upon  them,  nor  because 
government  has  made  them  a  legal  tender  ;  but  because 
we  know  that  they  represent  a  given  amount  of  value, 
and  we  therefore  know,  that  we  can  exchange  them  for 
the  same  amount  of  value,  whenever  we  please.  If  a 
bushel  of  wheat  sell  for  a  dollar,  we  know  that  it  costs 
as  much  labor  to  produce  a  dollar  at  the  mine  and  bring 
it  to  us,  as  to  produce  a  bushel  of  wheat  and  bring  it  to 
lis.  Hence,  we  know  that,  until  some  new  and  vastly 
more  productive  mines  are  discovered,  this  dollar  cannot 
be  produced  for  less  labor,  nor  represent  a  less  amount 
of  value.  And,  as  every  body  wants  a  dollar,  and  no 
one  can  furnish  it  at  a  less  cost,  we  know  that  it  will 
bring,  in  exchange,  the  same  as  we  have  given  for  it. 

We  remarked,  when  speaking  of  exchaiigeable  value, 
that  the  demand  for  any  product,  and,  of  course,  its 
exchangeable  value,  was  affected  by  the  number  of  de- 
sires it  would  gratify.  The  greater  the  number  of  de- 
sires which  it  will  gratify,  the  greater  the  number  of 
persons  who  will  want  it ;  hence,  they  will  overbid  each 


200  OF    THE    rUNCTIONS    OF    MONEY. 

Other  ;  and,  unless  there  be  some  itnpioved,  that  is, 
cheaper  method  of  producing  it,  its  exchangeable  value 
will  rise.  This  principle  applies  to  whatever  is  used  as 
money.  The  precious  metals  are  used  for  ornament,  for 
domestic  utensils,  and  for  coin.  If  the  use  of  them  fo' 
one  of  these  purposes  should  be  discontinued,  the  de- 
mand would  be  less  ;  and,  as  they  are  not  liable  to  de- 
cay, their  relative  price  would  fall. 

Hence  it  is,  that  the  amount  of  plate  and  utensils 
formed  of  the  precious  metals,  in  a  country,  is  no  crite- 
rion of  its  wealth,  but  frequently  an  indication  of  the 
reverse.  Should  commerce  be  unproductive,  and  ex- 
changes diminish,  and  our  intercourse  with  other  nations 
be  cut  off,  and  we  be  reduced  to  the  condition  of  Europe 
m  the  dark  ages,  there  would  be  but  little  need  of  the 
precious  metals  as  an  instrument  of  exchange,  and  their 
price  would  fall.  Hence  they  would  be.  melted  down  by 
the  rich,  into  plate.  And,  on  the  other  hand,  when  they 
have  been  used  for  plate,  and  the  demand  for  them,  and 
their  consequent  price,  have  from  any  cause  subsequently 
increased,  the  temptation  to  use  them  productively,  is 
too  great  to  allow  them  to  be  employed  in  this  manner  ; 
and  the  plate  is  rnelted  into  coin,  and  its  place  supplied 
with  porcelain,  or  plated  ware,  or  glass,  or  any  ether 
material  of  equal  beauty,  but  of  inferior  costliness. 


SECTION  III. 

OP    THE    FUNCTIONS    OF    MONEY. 

Let  us  now  suppose  metals  to  have  been  selected  l;y 
ihe  whole  community  as  the  circulating  medium,  and  that 
ihey  have  been  so  divided  and  verified  as  to  be  fitted  to 
accomplish  this  purpose.  We  shall  proceed  to  consider 
some  of  the  functions  which  these  metals  would  discharge. 

Money   is   the   instrument    for  facilitating  exchanges 
Thii,  when  considered  as  money,  is  its  only  office.     By 


OF    THE    FUNCTIONS    OF    MONET.  201 

acccraplisliing  this  purpose  in  the  least  time,  and  at  the 
least  expense  of  labor,  and  transportation,  and  wear,  it 
reduces  the  cost  of  every  product,  and  thus  adds  im- 
mensely to  the  productiveness  of  human  industry. 

The  principles  on  which  it  accomplishes  this  result, 
have  baen  already  alluded  to.  They  are  briefly  as  fol- 
lows . 

1.  The  cost  or  price  of  the  money  employed  in  every 
exchange,  is  equal  to  the  cost  or  price  of  the  article 
which  is  exchanged  for  it.  If  a  barrel  of  flour  in  Lima 
be  exchanged  for  ten  ounces  of  silver,  the  cost  of  pro- 
ducijig  the  flour,  j/nd  of  transporting  it  to  Lima,  is  equal 
to  the  cost  of  producing  the  silver  and  transporting  it  to 
the  same  place.  If  a  barrel  of  flour  in  New  York,  be 
exchanged  for  seven  ounces  of  silver,  the  cost  and 
transportation  of  the  one  at  the  place  of  exchange,  is 
equal  to  that  of  the  other.  If  the  flour  merchant  wishes 
for  a  thousand  ounces  of  silver,  he  can  procure  it  more 
cheaply  by  producing  flour  than  he  can  by  going  to  the 
mines  of  Mexico,  and  working  it  out  from  the  ore. 
And,  if  the  fniner  wishes  for  flour,  he  can  procure  it 
more  cheaply  by  working  in  the  mine,  than  by  attempt- 
ing to  raise  wheat  and  manufacture  flour  on  the  moun- 
tuins  of  Potosi. 

That  this  is  so,  is  evident  from  the  fact,  that  if  the 
cost  of  the  precious  metals  change,  their  exchangeable 
value  varies,  like  that  of  any  other  product.  Thus,  if 
new  and  richer  mines  are  opened,  so  that  the  cost  of 
producing  the  precious  metals  is  reduced,  or,  in  other 
words,  so  that  mining  labor  is  more  productive,  the  price 
of  the  precious  metals  falls.  In  such  a  case,  we  receive 
more  silvei  for  a  day's  work,  for  a  bushel  of  wheat,  for 
a  pound  of  wool,  or  for  any  other  product.  Money  is 
thus  rendered  cheaper,  on  the  same  principle  that  when 
a  wheat  harvest  is  abundant,  we  receive  a  larger  amount 
of  wheat  for  a  day's  work,  or  for  a  pound  of  wool,  than 
at  other  times.  This  is  exemplified,  in  the  great  change 
of  prices  which  occurred  throughout  the  world  after  the 
discovery  of  the  mines  of  South  America.  And,  on 
the  other  hand,  when  the  price  of  producing  the  precioue 


202        OF  THE  FUNCTIONS  OF  MONET. 

metals  is  increased,  their  exchangeable  value  rises.  This 
has  been  the  case,  for  some  time  past,  in  consequence 
of  the  civil  wars  of  South  America.  Hence,  there  ha? 
been  for  some  time  past,  a  gradual  rise  in  the  price  of 
the  precious  metals  ;  that  is,  the  price  of  other  things 
has  fallen  ;  or,  in  general,  if  the  cost  of  the  production 
of  the  precious  metals  diminishes,  while  that  of  the  pro- 
duction of  wheat  remains  the  same,  we  shall  receive 
more  silver  in  exchange  for  a  bushel  of  wheat.  If  the 
cost  of  producing  an  ounce  of  silver  is  increased  while 
that  of  producing  a  bushel  of  wheat  remains  the  same, 
we  shall  receive  less  silver,  in  exchange  for  a  bushel  of 
wheat.  That  is,  in  exchanging  products  for  the  precious 
metals,  as  for  any  thing  else,  we  exchange  on  the  prin- 
ciple of  labor  for  labor. 

Besides,  the  price  of  the  precious  metals,  like  that  of 
any  other  commodity,  is  influenced,  in  short  periods,  by 
the  fluctuations  of  supply  and  demand.  There  is,  in 
any  country,  the  course  of  whose  industry  is  not  distort- 
ed by  legislation,  a  supply  of  money,  equal  to  the  ordi- 
nary wants  of  the  community,  for  the  purposes  of  ex- 
change. The  price  of  both  articles,  is,  in  such  a  case, 
based  upon  the  cost  of  the  production  of  specie,  com- 
pared with  the  cost  of  the  production  of  the  several  ar- 
ticles for  which  it  is  exchanged.  But,  suppose  that 
«'hile  this  amount  of  specie  remains  the  same,  there 
should  happen  a  year  of  universal  productiveness  in  all 
the  departments  of  agricultural,  manufacturing,  and  com- 
mercial industry.  In  this  case,  the  number  of  exchang- 
es, and  the  amounts  exchanged,  would  be  proportionally 
mcreased.  The  instrument  with  which  exchanges  were 
to  be  made,  would  be  relatively  scarce  ;  the  demand  for 
it  would  rist;  ;  and  there  would  be  competition  among 
the  bidders  for  it.  Hence,  its  exchangeable  value  would 
rise  ;  that  is,  we  should  give  more  wool,  and  wheat,  and 
cotton,  for  an  ounce  of  silver  ;  every  thing  would  be 
cheap  ;  or,  in  other  words,  for  an  ounce  of  silver,  we 
should  procure  a  larger  amount  of  other  products  ;  as 
we  always  do,  in  a  season  of  universal  productiveness. 
\ivl.  on  the  contrary,  if,  while  the  ordinary  amount  of 


OF    THE    FUNCTIONS    OF    MONEY.  203 

specie  remained  in  the  country,  there  occurred  a  very 
unproductive  season,  the  number  of  exchanges  would 
proportionally  diminish,  and  there  would  be  less  demand 
for  the  instrument  of  exchange.  There  would  arise  a 
competition  among  the  sellers,  and  the  relative  price  of 
money  would  fall;  we  should  give  more,  money  for 
c\ery  other  article  of  necessity  ;  that  is,  every  thing 
would  be  dear,  as  every  one  knows  it  is,  in  a  seasoi: 
of  scarcity. 

We  see,  then,  that  the  exchangeable  value  of  mone), 
is  not  derived  from  its  shape  or  color,  from  the  stamp 
of  the  mint,  or  from  the  enactments  of  the  government ; 
but  that,  like  every  thing  else,  it  is  based  upon  the  cost 
of  its  production,  varying,  slightly,  and  for  short  periods, 
like  every  thing  else,  with  the  accidental  fluctuations  of 
supply  and  demand.  And  hence,  the  reason  why  a  man 
exchanges  a  bushel  of  wheat  for  two  ounces  of  silver, 
and  a  yard  of  broadcloth  for  six  ounces,  is,  that  it  costs 
as  much  labor  and  capital  to  produce  the  one  at  the 
place  of  exchange,  as  the  other,  and  that  no  one  can 
produce  the  given  amount  of  silver,  by  mining,  or  in 
any  other  way,  without  expending  the  same  amount  of 
labor  and  capital,  that  the  flour  merchant  or  the  manu- 
facturer has  expended  in  the  creation  of  his  products. 

As,  then,  every  man,  when  he  exchanges  his  products 
for  the  precious  metals,  knows  that  he  receives  a  com- 
modity of  as  much  cost  ;  that  is,  which  represents  the 
same  amount  of  labor  and  capital,  as  that  for  which  he 
exchanges  it ;  and,  as  he  knows  that  every  one  wants 
this  commodity,  that  is,  he  can  procure  with  it  any  thing 
which  any  one  else  has  to  exchange  ;  and,  as  no  one 
who  wants  it,  can  procure  it  on  any  better  terms  from 
any  one  else  than  from  himself,  every  one  is  willing  to 
exchange  for  money,  and  would  rather  exchange  for  it 
than  for  any  thing  else.  As  this  feeling  is  uni\ersal, 
every  one  acts  upon  the  same  principle  ;  and  bene  e,  all 
exchanges  are  either  made  in  money,  or  else  are  regu- 
lated by  it. 

II.  But  the  question  will  naturally  arise,  if  the  value 
of  the  silver  be  equal  to  that  of  all  the  amounts  exchang- 


20'l  OF    THE    FUNCTIONS    OF    MONEY 

ed  for  it,  must  not  the  value  of  the  precious  metals  ii; 
the  community,  be  equal  to  the  value  of  all  the  otl.er 
commodities  ? 

We  answer,  this  would  be  the  case,  if  all  exchanges 
were  actually  made  in  money,  and  actually  made  at  the 
same  instant.     But  the  contrary  is  the  fact. 

No  man  exchanges  all  his  products  at  once,  but  ex- 
changes them  in  successive  portions.  If  two  men  pos- 
sess one  thousand  dollars'  worth  of  commodities  ;  foi 
instance,  if  A  and  B  live  in  different  towns,  and  if  A 
have  wool  and  B  have  wheat,  and  they  exchange  the 
whole  at  once,- and  use  money  as  the  instrument,  they 
must  each  possess  also  one  thousand  dollars  with  which 
to  make  the  exchange  ;  that  is,  A  must  give  B  one 
thousand  dollars  for  his  wool,  and  vice  versa.  But,  if 
they  exchange  in  portions  of  the  value  of  ten  dollars,  a» 
one  hundred  successive  times,  ten  dollars  in  the  posses- 
sion of  each,  and  the  same  identical  ten  dollars,  would 
accomplish  the  whole  object.  Now,  as  it  is  evident,  that 
on  any  particular  day,  only  a  very  small  part  of  the 
whole  amount  of  values  in  the  possession  of  the  commu- 
nity, is  exchanged,  it  is  evident  that  only  so  much  of  the 
instrument  of  exchange  is  necessary,  as  will  accomplish 
the  exchanges  which  the  convenience  of  the  community 
requires.  No  one  supposes,  because  there  is  a  million 
tons  of  merchandise  in  a  city,  that  there  must  have  been 
vehicles  capable  of  carrying  a  million  tons  at  once  in  or- 
der to  bring  it  there.  A  locomotive,  carrying  fifty  tons 
at  once,  if  it  went  and  returned  frequently,  would  speed- 
ily accomplish  the  whole  work. 

2.  But  this  is  not  all.  A  large  amount  of  exchanges 
•s  constantly  made  in  kind.  A  buys  wool  of  B,  and  B 
Ltiys  cloth  of  A.  They  both  estimate  the  value  of 
then"  product  in  money,  because,  as  this  is  the  usual 
medium  of  exchange,  and  that  by  which  they  are  oblig- 
ed to  estimate  cost,  this  method  of  estimation  is  most 
convenient.  Each  charges  the  other  with  all  that  he 
purchases,  at  its  value  in  silver.  At  the  close  of  the 
year,  they  adjust  their  accounts  with  each  other.  If  A 
and  B  have  both  received  of  each  other  the  same  amount 


OF    THE    FUNCTIONS    OF    MONET.  205 

of  value  estimated  in  silver,  the  one  account  balances 
the  other  ;  and  thus,  no  money  at  all  is  required.  If 
one  have  received  more  than  the  other,  he  pays  merely 
the  difference,  either  in  silver,  or  else  in  his  own  prod- 
uct, at  the  option  of  his  creditor.  In  this  manner,  a 
large  proportion  of  the  exchanges  actually  made,  is  con- 
ducted. In  this  manner,  book-keeping  tends  greatly  to 
diminish  the  amount  of  the  circulating  medium  neces?a 
ry  for  the  exchanges  of  a  oommunity. 

3.  We  see  that  this  is  still  more  emphatically  thn 
case,  in  respect  to  all  the  exchanges  which  take  |)lace 
between  different  districts,  and  different  nations.  Inas- 
much as  no  society  can  gain  possession  of  the  objects  of 
desire,  except  by  its  own  labor,  it  must  pay  for  what  it 
receives  in  the  product  of  the  labor  of  others,  with  what 
it  sends  away,  in  the  product  of  its  own  labor  ;  that  is 
to  say,  the  exports  of  any  country  must  be  substantially 
equal  to  its  imports.  If,  then,  the  transactions  between 
two  nations  should  be  precisely  equal,  there  would  be  no 
need  of  the  transmission  of  any  money  at  all  between 
them.  If  A  send  ten  thousand  dollars'  worth  of  cotton 
to  Liverpool,  and  import  ten  thousand  dollars'  worth  ol 
calicos  from  Manchester  ;  he  authorizes  the  manufac- 
turer in  Manchester  to  receive  in  payment,  the  ten  thou- 
sand dollars  which  are  due  to  him  from  the  merchant  in 
Liverpool ;  and,  thus,  the  whole  matter  is  adjusted.  If 
we  receive  from  England,  values  to  a  larger  amount  than 
she  wishes  to  receive  in  our  own  productions,  we  send 
some  of  our  productions  to  a  third  country,  and  thus  pro- 
cure for  England,  what  she  wishes  from  the  third  coun- 
try, in  sufficient  quantity  to  pay  the  residue.  If  we  can 
get  her  products,  in  this  manner,  cheaper  than  we  can 
make  them  ourselves,  it  is  for  our  interest  to  do  so.  If 
they  thus  come  to  us  at  a  cost  greater  than  that  for  which 
we  could  produce  them  ourselves,  we  shall  relinquish  the 
trade,  and  begin  to  manufacture  them.  In  either  case, 
there  is  no  necessity  for  the  use  of  money.  And  hence, 
m  general,  the  only  reason  why  money  is  ser.t  from  one 
country  to  another,  in  the  transactions  of  commerce,  is 
the  same  reason  as  that  for  whiph  tea,  or  coffee,  or 
18 


20G        OF  THE  FUNCTIONS  OF  MONET 

cotton,  or  flour,  is  sent ;  that  is,  because  it  is  so  much 
clioaper  in  the  country  from  which  it  is  sent,  tlian  in 
that  to  which  it  is  exported,  that  a  larger  value  can  b«i 
procured  for  it,  than  for  the  same  value  of  any  otiiei 
commodity.  In  this  case,  it  is  for  the  advantage  of  both 
countries  that  it  should  be  so  exchanged. 

The  amount  of  the  circulating  medium,  in  any  one 
country,  and,  of  course,  in  all  countries,  must,  therefore, 
be  very  small,  in  proportion  to  the  whole  amount  of  the 
capital  of  a  country.  The  actual  proportion,  |)erhaps, 
cannot  be  estimated  with  accuracy.  Jn  Great  Britain, 
writers  on  this  subject  have  greatly  varied.  Some  iiave 
estimated  it  at  the  50th,  and  others,  at  the  127ih  part 
of  the  whole  capital.  The  latter  is,  probably,  by  far 
the  nearer  to  the  truth. 

III.  We  see,  then,  that,  under  given  circumstances, 
in  any  country,  a  given  amount  of  specie  will  be  requir- 
ed to  effect  its  exchanges  ;  and  that,  that  amount  will 
depend  upon  the  relative  value  of  tl^e  precious  metals 
with  other  things,  and  upon  the  number  and  the  fucili- 
ties  of  exchange.  These  latter  circumstances  remain- 
ing the  same,  the  same  value  in  specie  will  always  be 
required,  and  no  more.  If  specie,  equal  in  value  to  ten 
million  bushels  of  wheat  be  required,  no  more  in  vulue 
can  be  used.  If  the  amount  be  increased,  its  value 
will  fall.  If  the  amount  be  diminished,  its  value  will 
rise.  And  this  rise  and  fall  will  equally  take  place, 
whether  the  relative  variation  arise  fiom  a  change  in  the 
cost  of  specie  or  of  other  products.  Now,  it  is  easy  to 
see  that  these  variations,  if  left  alone.,  will  regulate 
themselves. 

We  have  seen,  already,  that  the  relative  value  of 
specie  and  of  other  products  may  vary.  Let  us  sup- 
pose, in  the  first  instance,  that  production,  in  any  one 
year,  is  greatly  increased,  so  that  money  in  any  country 
is  dear,  or,  which  is  the  same  thing,  that  other  products 
are  cheap.  Let  us,  for  the  sake  of  illustration,  suppose, 
that  in  New  York,  ffour  is  sold  at  four  dollars  per  barrel 
If,  now,  a  merchant  wished  to  import  a  cargo  of  wine 
from  Bordeaux,  sinc§  four  dollars  and  a  barrel  of  floui 


OF    THE    FUNCTIONS    OF    MONEY.  207 

here,  are  at  the  same  price,  he  can  as  cheaply  send  out 
the  one  as  the  other,  with  which  to  pay  for  his  wine. 
But  suppose  that  a  barrel  of  flour  will  purchase  more 
wine  in  Bordeaux,  than  four  dollars  or  four  ounces  of 
silver.  He  will  then  send  flour,  instead  of  silver  ;  and, 
as  all  other  men  in  their  senses  will  do  the  same,  of 
couise  no  specie  will  leave  the  country.  On  the  contra- 
ry, a  merchant  in  London,  wishing  to  purchase  cotton  io 
New  York,  will  ascertain  the  relative  value  of  specie, 
and  that  of  ealico,  or  hardware,  or  iron  ;  and  will  send 
specie  in  payment  for  his  Cotton,  whenever  he  finds  that, 
by  a  given  value  of  this  export,  he  can  import  a  greater 
amount  of  cotton,'  than  by  the  same  value  of  any  other. 
Other  merchants  in  other  places  will  do  the  same,  until 
the  requisite  amount  of  specie  has  flowed  in,  and  it  ha., 
become  as  abundant  here,  as  in  other  countries.  Thus, 
when  specie  is  high  in  any  country,  it  goes  out  nowhere, 
and  comes  in  from  everywhere. 

On  the  contrary  :  suppose  an  unproductive  season  to 
arise,  and  the  relative  quantity  of  specie  in  this  country, 
fb  exceed  the  average  in  other  countries.  In  this  coun- 
try, therefore,  specie  would  be  cheap  ;  that  is,  every 
thing  else  would  be  dear.  The  merchant,  who  wished 
to  import  a  cargo  of  iron,  would  compare  the  prices  of 
flour  and  of  money.  If  flour  was  at  fifteen  dollars  the 
barrel,  that  is,  if  he  could  purchase,  at  the  same  price, 
a  barrel  of  flour  and  fifteen  dollars,  he  would  easily  as- 
certain by  which,  in  Russia,  he  could  procure  the  great- 
est amount  of  iron.  If  fifteen  dollars  would  procure  the 
most  iron,  he  would  send  the  dollars  instead  of  the  flour. 
'J'his  would  be  an  advantage  to  him  and  to  the  country, 
because,  by  this  mode  of  exchange,  he  receives  the 
largest  amount  in  return  ;  and  he  procures  it  by  means 
of  that  which  is  relatively  the  most  abundant  ;  that  is, 
wiiich  is  manifestly  the  least  needed.  And  a  merchant 
in  Liverpool,  who  knows  the  prices  of  our  products, 
observing  that  he  can  exchange  more  profitably  with  us 
by  receiving  his  payment  in  specie,  at  the  relative  prices 
which  specie  and  products  sustain  to  each  other,  will  re- 
ceive his  payments   in  specie.     Thus,   by  tlie  sending 


208        OP  THE  FUNCTIONS  OF  MONEY. 

abroad  of  oiir  specie,  which  we  do  not  so  much  need, 
we  shall  be  supplied  with  other  products  which  we  more 
need  ;  and  hence,  the  relative  value  of  specie  to  other 
products,  will  be  again  brought  to  an  equihbrium.  In 
other  words,  when  specie  is  cheap  in  any  country,  n 
comes  in  from  nowhere,  and  goes  out  every wheie. 
Thus,  among  countries  between  which  there  is  frequent 
intercourse,  and  a  free  circulation  of  mercantile  infor- 
mation, the  price  of  the  precious  metals  can  never,  fot 
long  periods,  vary  much  from  the  medium  rate,  or, 
the  rate  which  is  fixed  by  nature,  in  the  cost  of  their 
production.  Hence  we  see,  that  a  provision  is  made, 
founded  on  the  self-interest  of  man,  by  which  any  great 
fluctuation  in  the  exchangeable  value  of  the  metals  used 
as  a  circulating  medium,  is  prevented.*  It  is  evident 
that  the  same  consequences  must  ensue,  from  what  cause 
soever  the  rise  of  prices  may  have  taken  place.  Sup- 
pose that  instead  of  a  diminution  of  productions,  there 
should  occur  an  increase  of  the  circulating  medium,  as, 
for  instance,  by  very  large  issues  of  bank  paper.  The 
proportion  between  the  circulating  medium  and  the  prod* 
nets  to  be  exchanged  would  be  disturbed.  Money  would 
be  plenty,  and  prices  would  rise.  They  might  easily  rise 
so  high  that  products  could  not  be  exported  as  well  as 
money.  Specie  would  then  be  exported,  and  the  bank 
notes  would  be  recalled.  Thus  large  issues  and  high 
prices,  create,  of  necessity,  mercantile  distress  and  stag- 
nation of  biLsiness. 

IV.  Hence,  we  also  see  what  is  a  real  scarcity,  and 
lehat  an  abundance  of  money  ;  if,  by  the  term  money, 
we  understand  merely  a  metallic  circulating  medium 


t 


*  While,  however,  this  is  the  natural  cause  for  tlie  exportation  of 
epecie.  other  causes,  which  may  be  termed  accidental,  frequently  oo» 
cur.  Where  one  country  is  larcrely  indebted  to  another  country,  and 
Its  payments  fall  due  at  a  time  when  the  supply  of  its  own  products  i8 
tnsuilicient  to  meet  its  indebtedness,  or  when  the  foreign  market  it 
glutted  with  those  products ;  specially  if  there  be  any  doubt  of  its 
ultimate  solvency  ;  then,  in  order  to  meet  its  engagements  in  time,  it 
is  frequently  obliged  to  transmit  to  its  creditor  specie  funds  to  make 
op  the  deficiency.  This  is  one  of  the  results  of  the  abuse  of  crec'it 
snd  is  always  attended  witn  great  financiiil  embarrassment. 


OF    THE    FUNCTIONS    OF    MONEY.  209 

Money,  we  have  said,  is  the  instrument  by  which  we 
facilitate  exchanges.  Novv,  if  we  bear  this  in  mind,  it 
/s  easy  to  see  what  is  a  plenty  and  what  a  scarcity  of 
this  instrument.  A  power  loom  is  an  instrument  for  fa- 
cilitating the  operation  of  transforming  yarn  into  cloth 
Power  looms  are  too  plentiful,  when  there  are  too  many 
to  perform  the  work  that  is  required  to  be  done ;  in  this 
case,  we  can  buy  them  cheap ;  that  is,  we  have  to  give 
for  them  a  less  amount  of  cotton  cloth,  or  of  wool,  or 
of  silver.  Power  looms  are  scarce,  when  there  are  not 
enough  of  them  to  perform  the  operations  which  are  re- 
quired ;  in  this  case,  we  find  it  difficult  to  purchase 
ihem ;  they  are  dear  ;  that  is,  we  are  obliged  to  give  for 
them  more  than  the  ordinary  amount  of  cotton,  or  of 
wool,  or  of  silver.  The  case  is  the  same  with  vehicles 
for  transportation,  or  with  any  other  instruments. 

Now  money  is  just  such  an  instrument.  It  is  requir- 
ed, to  facilitate  exchanges.  To  accornphsh  a  given 
amount  of  exchange,  a  certain  value  in  money  is  requir- 
ed, and,  in  ordinary  times,  this  value  always  exists. 
And,  the  exchanges  remaining  the  same,  we  cannot  em- 
ploy for  this  purpose  more  than  this  amount  of  value. 
If  a  quantity  equal  to  one  thousand  ounces  of  silver,  oi 
of  one  thousand  bushels  of  wheat,  be  required  to  per 
form  the  exchanges  of  a  certain  community,  we  cannoi 
employ  more  than  this  amount  of  value.  If  we  increase 
the  quantity,  we  shall  only  decrease  the  value  propor- 
tionally. If  such  a  country  be  insulated  from  other 
countries,  and  we  introduce  into  its  circulation  one  thou- 
sand additional  ounces  of  silver,  equal  to  one  thousand 
additional  bushels  of  wheat,  the  value  of  the  whole  two 
thousand  will  be  just  equal  to  that  of  the  one  thousand 
ounces  before  ;  that  is,  the  value  will  not  alter.  If,  on 
the  other  hand,  from  such  a  country  thus  insulated,  we 
remove  half  the  circulating  medium,  the  remaining  half 
will  accomplish  the  purpose  of  the  whole  ;  that  is,  it 
will  double  in  value.  This  is  evident,  because  there  are 
neither  more  nor  less  exchanges  to  be  made  than  before, 
and  a  'ariation  in  the  instrument  does  not  vary  the 
amount  of  the  work  which  the  necessities  of  the  com- 
18* 


210  OF    rilE    FUNCTIONS    OF    MONEY. 

munit)  require  to  be  done.  If  there  be  a  giver,  amount 
of  yarn  to  be  woven  by  twenty  looms,  the  quantity  will 
not  be  increased,  by  employing  forty  looms.  And,  if 
we  employ  forty,  we  must  work  all  of  them  but  half  the 
time  ;  that  is,  each  one  will  be  of  half  its  original  value. 
If  the  work  be  doubled,  we  must  work  them  by  day  and 
by  night ;  that  is,  each  one  will  be  worth  twice  as  much 
as  before.  But,  manifestly,  the  quantity  of  work  to  be 
done  being  given,  it  can  never  be  affected  by  varying 
the  quantity  of  the  instruments  by  which  if  is  accom- 
plished 

Now,  suppose  the  exchanges,  in  a  given  community, 
be  equal  to  fifty  millions  annually,  and  that  there  are  re- 
quired, to  effect  these  exchanges,  one  milHon  ounces  of 
silver,  and  that  this  quantity  of  silver  actually  exists  in 
its  possession.  Under  these  circumstances,  there  will 
be  neither  a  plenty  nor  a  scarcity  of  money,  and  it  will 
be  neither  exported  nor  imported.  But  suppose,  that, 
owing  to  a  very  productive  harvest,  or  some  rapid  im- 
provement in  the  productiveness  of  human  labor,  the 
amount  of  products  to  be  exchanged  arises  to  seventy- 
five  millions.  Here  will  arise  a  scarcity  of  money ; 
there  will  be  more  exchanges  than  can  be  accomplished 
by  the  instrument  employed  for  effecting  them.  The 
price  of  money  will  rise  ;  in  other  words,  the  price  of 
other  commodities  will  fall,  and  every  thing  will  be 
cheap  ;  that  is,  though  you  cannot  purchase  more  wool, 
or  butcher's  meat,  or  cotton,  with  a  barrel  of  flour,  than 
you  could  last  year,  you  can  purchase  more  wool,  or 
meat,  or  cotton,  with  the  money  which  a  barrel  of  flour 
cost  last  year.  The  same  result  will  take  place,  if,  while 
production  continues  as  active,  one  half  of  the  specie 
for  any  purpose,  as  the  carrying  on  of  a  foreign  war, 
vveie  sent  out  of  the  country.  In  this  case,  as  in  the 
other,  the  price  of  money  will  rise  ;  that  is,  money  will 
be  dear,  and  every  thing  else  will  be  cheap. 

But  it  is  easy  to  see,  on  the  principles  already  ex- 
plained, in  what  manner  this  difficulty  will  be  met.  In 
the  first  place,  inasmuch  as  money  prices  are  lower  than 
any  others ;  that  is,  as  specie  retains  its  former  value  ia 


OF    THE    FUNCTIONS    OF    MONEY.  211 

all  Other  places,  but  here,  it  is  dearer ;  that  is',  will  pur 
chase  more  than  any  other  commodity  ;  other  nations 
will  send  specie  in  exchange.  This  will  be  done,  until 
the  equilibrium  is  restored.  And  thus,  this  one  nation 
shares  the  blessing  of  God's  providence  with  its  neigh- 
bors, since  they  receive  hs  productions  at  a  less  price. 
In  the  second  place,  something  else,  as,  for  instance, 
notes  of  hand,  will  be,  in  part,  substituted  for  specie  ; 
that  is  to  say,  as  there  is  too  much  exchanging  to  be 
done  in  a  given  time  by  the  instrument,  at  its  utmost 
power  of  working,  the  work  is  spread  over  a  longer 
time,  and,  instead  of  exchanging  for  specie  now,  the 
parties  agree  to  exchange,  but  defer  the  payment  for 
three  or  six  months.  Thus,  when  a  weaver  is  unable  to 
perform  the  work  of  his  customers  to-day,  he  promises 
to  do  it  at  a  subsequent  time  ;  and,  in  the  mean  while 
if  his  present  instrument  will  not  accomplish  it,  he  pro 
cures  others  that  will.  So,  the  merchant  spreads  the 
exchange  of  to-day  over  a  larger  time,  and,  in  tlii? 
time,  is  able  to  secure  the  instrument  to  accomplish  the 
object. 

And  thus  we  see,  what  is  also  an  unusual  plentiful- 
ness  of  money.  If,  while  exchanges  were  at  fifty  n)il- 
lions,  and  one  million  ounces  of  silver  were  necessary  to 
efTect  them,  a  mine  were  discovered,  by  which  the  quan- 
tity in  circulation  was  doubled,  the  price  of  silver  would 
fall,  and  we  should  give  twice  the  usual  price  for  com- 
modities. Or,  if  while  the  silver  remained  the  same, 
production,  and,  of  course,  exchange,  diminished  one 
half,  the  result  would  be  the  same.  In  this  case,  as  we 
have  already  seen,  specie  would  be  sent  in  exchange  to 
other  countries,  because  it  was  less  needed,  and  its  place 
would  be.  supplied  by  other  productions  which  wer» 
more  needed. 

Hence  we  see,  that  a  plentifulness  or  a  scarcity  of 
money  forms  no  occasion  which  calls  for  the  interference 
of  government,  but  that  it  is  a  matter,  which,  if  left 
alone,  will  regulate  itself.  When  money  is  really 
scarce,  there  is  no  need  of  prohibiting  its  exportation  ; 
for  no  one  will  be  so  unwise  as  to  export  it.     When  it 


212  OF    THE    FUNCTIONS    OF    MONEY. 

IS  abundant,  it  is  useless  to  proliibit  its  expoitation,  be- 
cause It  cannot  be  prevented  ;  and  because,  if  it  could 
be  prevented,  by  preventing  it,  we  should  deprive  our- 
selves of  the  only  method  in  our  power  of  alleviating  the 
evils  whiv'-h  we  suffer.  The  precious  metals  are  rela- 
tively abundant  in  the  states  of  South  America  ;  that  is, 
they  need  other  kinds  of  capital  more  than  they  need 
this.  How  absurd  a  policy  would  it  be,  to  forbid  the 
exportation  of  those  metals,  and  thus  deprive  themselves 
of  all  the  Conveniences  of  other  countries,  nay,  of  the  very 
means  on  which  progress  in  civilization  and  the  arts,  and 
in  the  real  accumulation  of  wealth,  depends. 

Hence  the  notion,  that  the  plentifulness  or  scarcity  of 
money  is  an  unfailing  indication  of  the  prosperity  or  of 
the  adversity  of  a  country,  is,  in  the  highest  degree,  fal- 
lacious. If  the  scarcity  result  from  an  increased  pro- 
ductiveness of  labor,  it  is  an  indication  of  prosperity  ; 
just  as  the  business  of  weaving  is  most  prosperous,  when 
the  weavers  have  more  work  than  they  can  do.  If  it 
result  from  a  casual  withdrawment  of  specie,  it  is  an  am- 
biguous indication,  and  its  effect  upon  the  country  will 
depend  upon  the  use  which  is  made  of  that  which  is  sent 
abroad.  If  it  be  employed  in  wars,  or  in  other  unpro- 
ductive consumption,  it  is  just  so  much  loss  ;  and  it 
matters  not  whether  this  amount  of  loss  be  in  silver,  or 
gold,  or  copper,  or  tea,  or  coffee,  or  cotton.  If  it  be 
well  invested,  and  return  in  the  fortn  of  a  profitable  ad- 
dition to  the  capital  of  the  country,  it  is  just  as  much  a 
source  of  gain,  as  though  the  same  profit  were  made  up- 
on any  other  article.  It  is  profitable  for  an  individual  to 
give  one  thousand  dollars  for  what  is  worth  fifteen  hun 
dred  dollars,  although,  for  a  month  afterwards,  he  be 
obliged  to  live  somewhat  more  economically.  Apd 
what  is  profitable  for  the  individual,  is  profitable  for  the 
country. 

And  so  of  the  plentifulness  of  money.  If  a  mine 
were  discovered,  by  which  the  quantity  of  silver  were 
doubled,  and  if  this  silver  were  produced  at  a  fair  profit 
to  the  miner,  it  would  be  an  advantage,  inasmuch  as  it 
nrould  open  ?  new  and  profitable  method  of  employing 


OF  THE  FUNCTIONS  OF  MONEY.        213 

both  capital  and  labor.  But,  in  this  case,  it  could  be  of 
use  only  by  its  exportation,  because,  as  the  number  of 
exchanges  in  the  country  has  not  been  increased,  only 
ihe  former  amount  of  value  is  needed  for  a  circulating 
medium,  and  to  increase  the  quantity,  will  be  only  to 
diminish  the  value.  By  being  sent  .abroad,  capital,  in 
other  forms,  susceptible  of  change  and  increase  of  val- 
ue, is  imported  ;  and  thus,  a  country  is  made  richer. 
If  the  plentifulness  be  the  result  of  the  diminution  of 
exchanges,  it  is  an  indication  of  adversity,  because  it 
shows  that  productiveness  has  fallen  off,  that  the  means 
of  living  are  less  abundant,  and  that  capital  is  in  haste  to 
flee  to  more  congenial  climes.  When  this  is  the  case, 
it  generally  springs  from  oppressive  legislation.  In  this 
case,  it  is  better  for  a  government  to  remove  the  cause, 
than  to  aggravate  the  evil  by  additional  and  aggravated 
wrong.  To  proliibit  the  exportation  of  specie,  in  such 
a  case,  is  not  only  to  oppress  a  human  being,  but  to  for- 
bid him  the  use  of  any  means  by  which  he  shall  escape 
from  your  oppression. 

Thus  it  follows,  that  no  indication  of  the  prosperity 
of  a  country  can  be  derived,  either  from  the  plentiful- 
ness or  frou)  the  scarcity  of  money.  The  only  sure  in- 
dication of  its  economical  prosperity,  is  the  increase  of 
its  productiveness  ;  that  is,  an  increase  of  the  supply  of 
objects  of  desire  at  the  same,  or  at  a  diminished 
amount  of  labor.  The  increase  or  diminution  of  the 
quantity  of  specie  m  circulation,  is  of  importance,  only 
in  so  far  as  it  indicates  this  increase  of  productiveness, 
and  no  further.  We  estimate  a  nian's  prosperity,  not 
by  the  amount  of  money  in  his  possession,  but  by  his 
power  to  command  a  larger  or  a  smaller  amount  of  llio 
objects  of  desire. 

V.  And  hence,  we  may  judge  of  the  truth  of  that 
oft-repeated,  but  worse  than  puerile  maxim,  "  It  mat- 
ters not  what  becomes  of  property,  so  long  as  the  mon- 
ey is  in  the  country."  If  a  million  of  dollars  be  lost  in 
an  unproBiable  canal,  or  ten  millions  are  sunk  by  a  profit 
less  experiment  in  manufactures,  we  are  told,  that  it  is 
all  of  no  consequence ;  nobody  is  any  poorer,  because 


214  OF    THE    FUNCTIONS    OF    MONET. 

the  money   is  in  the  conntry.      That  is,  if  a  nrJIlion  dol- 
lars^ worth  of  labor  and  capital  have  ceased  to  exist,  we 
are  no  poorer  than  we  were  when  this  capital  was  exist 
ing,  and  yielding   to  its  owners,  and,  of  course,  to  the 
/public,  its  annual  production.     If  so,  why  not  invest  the 
^  whole   capital  in  this  manner,  or  why  not  pay  men   for 
I  throwing  it  all  into  the  sea  ?     The  money  was  merely 
/  the  instrument  which  we  used  to  effect  its  destruction  ; 
and    surely,  we   are    but   little   better  off,  because  the 
,  means  of  destruction  remain.     If  a  thief,  in  the  night, 
(  had  emptied  your  store-house  with  a  wheelbarrow,  you 
\  would  not  be  very  easily  convinced  you  were  no  poorer, 
because  he  had  left  the  wheelbarrow  behind  him.     In 
the  late  disastrous  fire  in  New  York,  it  is  said  that  £fteen 
millions  of  capital  were  consumed.     I  did  not  hear  that 
any  specie  was  destroyed,  and  yet,  I  think   it  would  be 
difficult  to  show  to  the  sufferers,  that  no  harm  was  done, 
because   the   money  was   all   in  the   country.     Now,  it 
matters  not  in  what  manner  property  is  rendered  value- 
less,   whether    by    fire,   or   by    folly.      It    matters    not, 
whether  fire  does  the  work  for  nothing,  or  whether  you 
hire   workmen  to  do  it  at  heavy  wages.      It  matters  not, 
i  whether  the  fifteen  millions  be    turned  into  ashes,  and 
\  thus  rendered  valueless,  or  whether  it  be  turned  into  a 
canal,  which  is   equally   valueless.      If  your  store   and 
goods  are  burned  up,  you  would  give  away  the  ashes. 
I  If  it  be  turned  into  a  canal,  which  you  would  be  equall}' 
willing  to  give  away,  in  what  respect  are  you  better  off 
m  the  one  case,  than  in  the  other. 

VI.  We  have  already  seen,  that  the  natural  price  for 
(ho  precious  metals  is  the  cost  of  their  production,  and 
that  a  given  amount  of  them  will  be  required  for  effecting 
the  exchanges  of  the  community.  Suppose,  now,  these 
nietali;  to  be  indestructible,  and  unchanged  in  quantity, 
and  the  quantity  of  other  productions  annually  created,  to 
be,  for  fifty  years,  the  same ;  it  is  evident  that  specie 
and  other  products  would,  at  the  end  of  that  time,  bear 
the  same  ratio  to  each  other,  as  at  present ;  that  is,  the 
money  prices  of  all  commodities  would  remain  unchang- 
ed.    But  neither  af  these  is  the  case.    In  the  first  ])lace, 


OP    THE    FUNCTIONS    OF    MONEV.  216 

the  productions  of  the  earth  annually  increase ;  this  is 
evident,  from  the  increase  of  its  number  of  inhabitants. 
And,  on  the  other  hand,  the  precious  metals  are  annually 
produced,  in  large  quantities,  from  the  mines.  But  they 
are  also  destructible,  and  suffer  slightly  from  wear  and 
tear,  when  used  as  coin  ;  and  they  are  also  raj-idly  con- 
sumed in  the  purposes  of  the  arts.  Now,  if  these  t»r-. 
causes  exactly  counterbalanced  each  other  ;  that  is,  if 
the  supply  of  the  precious  metals  were  precisely  such  as 
to  correspond  to  the  increase  of  productiveness,  and  to 
the  amount  consumed  in  the  arts,  prices  would  still  re- 
main as  before.  If  the  increase  of  the  metals  were  not 
sufficient  to  supply  the  increased  demand  arising  from 
increased  productiveness,  and  other  causes,  the  price  of 
the  metals  would  rise  ;  that  is,  the  price  of  other  things 
would  fall.  And  if,  on  the  other  hand,  the  increase  of 
the  metals  were  greater  than  the  increase  of  productive- 
ness, their  price  would  fall  ;  that  is,  the  price  of  other 
things  would  rise.  Now  it  appears  that,  previously  to 
the  discovery  of  America,  for  several  centuries,  there 
was  no  great  change  in  the  relative  value  of  specie  and 
that  of  other  commodities.  That  event,  however,  by 
'hrowing  upon  the  world  an  immense  amount  of  the 
precious  metals,  effected,  at  once,  a  great  change  in  their 
value.  As  they  are  but  slowly  consumed,  this  diminu- 
tion of  their  value  continued  for  some  time  to  increase. 
This  depreciation  was  still  more  advanced,  by  the 
troubled  condition  of  Europe,  which  prevpited  the  de- 
velopment of  her  productive  energies  ;  and  by  the  slow 
progress  which  she  was  making  in  the  arts  of  ci\  iliza 
tlon.  But,  of  late,  in  consequence  of  (he  nitroduction 
of  machinery  and  the  division  of  labor,  and  of  improvfv 
ments  in  government  and  legislation,  the  increase  of 
productiveness  has  more  than  kept  pace  with  xh"  in- 
creased  supply  of  the  precious  metals.  Hence,  oi  late, 
jirices  have  fallen  ;  and  this  has  been  specially  the  case, 
111  consequence  of  the  peace  of  the  world,  for  the  last 
twenty  years,  since  the  fall  of  Napoleon. 

These  remarks  are  illustrated  by  the  following  facts  : 
The  quantity  of  wheat,  in    ^>an^e,  which   was    ex 


ftl6  OF    THE    FUNCTIONS    OF    MONET. 

changed  in  1520,  for  512  grains  of  silver,  was  exchanged 
in  1536,  for  1063  grains  ;  in  1602,  for  2060  grains  ; 
and,  in  1789,  for  2012  grains  ;  thus  designating  a  varia- 
tion in  the  prices  of  silver,  according  to  the  principles 
which  we  have  suggested. 

Now,  as  the  progress  of  geology,  mining,  and  min- 
eralogy, will  probably  greatly  increase  the  production  o( 
the  precious  metals  in  future,  it  is  probable  that  their 
prices  will  continue  to  fall.  Hence,  when  indefinite 
leases  are  given,  it  is  wise  never  to  fix  a  rent  at  a  given 
amount  of  silver  per  annum,  but  at  a  given  amount  of 
some  other  less  variable  product,  such  as  wheat.  Or  it 
would,  perhaps,  be  better  still,  to  average  the  rent  at 
definite  periods,  on  terms  which  should  be  equitable, 
and  of  which  neither  party  could  take  any  advantage. 
The  oldest  professorships  in  Oxford,  were  established 
upon  a  salary  of  £40  sterling  a  year.  This  sum  was, 
probably,  then  sufficient  to  support  a  teacher  hand- 
somely ;  and  was  equal  to  the  rent  of  an  ordinary  farm. 
Tf  a  farm  had  been  leased  then,  at  £  40  per  year,  per- 
petually, the  rent,  at  this  time,  would  have  been  but  a 
very  small  part  of  its  value.* 


SECTION  IV. 

OP    THE     AGENCY     OF    GOVERNMENT,    IN     RESPECT    TO 
A    CIRCULATING    MEDIUM. 

We  have,  thus  far,  said  nothing  concerning  the  agency 
of  government,    in    respect   to    a    circulating   medium. 

• 

*  It  is  difficult  to  ascertain,  with  any  degree  of  accuracy,  the  an- 
nual supply  and  the  annual  consumption  of  the  precious  metals 
McCulloch,  a  high  authority,  estimates  the  supply  from  the  Ameri 
can,  European,  and  Russo-Asiatic  mines,  at  six  million  pounds  ster- 
.ing  per  annum,  and  the  consumption,. for  the  purposes  of  the  arts, 
at  nearly  four  millions  ;  leaving  somewhat  more  than  two  million 
poundd  sterling  of  silver  and  gold,  for  the  purposes  of  coining. 

Dictionary  of  Commerce:  Art.,  "Precious  MetaU  " 


AGENCY    OF    GOVERNMENT.  217 

The  reason  is,  that,  thus  far,  the  necessity  for  the  exer- 
tion of  such  agency  has  not  been  apparent.  Two  men 
use  money,  in  exchange,  for  the  same  reason  that  a  man 
uses  a  hammer  for  the  purpose  of  driving  a  nail  ;  be- 
cause I.e  thus  economizes  both  time  and  labor.  All 
men  us«;  money  in  exchanges,  for  the  same  reason  that 
all  men  use  hammers  for  the  purpose  of  driving  nails  ; 
because  they  all  find  that  they  thus  save  time  and  labor. 

Had  governments  no  agency  at  all  in  the  matter,  the 
precious  metals,  as  a  circulating  medium,  might  have 
be«n  both  mtroduced,  and  universally  employed  ;  and 
they  would  have  been  so  introduced  and  employed,  as 
they  actually  were^  in  the  time  of  Abraham.  Hence, 
as  we  have  before  remarked,  a  circulating  medium,  de- 
rives its  use,  as  money,  from  its  inherent  fitness,  and 
the  desire  of  men  so  to  employ  it,  and  not  from  any 
agency  of  government  in  establishing  it.  While,  how- 
ever, this  is  the  case,  and  while  this  is  always  to  bo 
borne  in  mind,  there  is  yet  some  agency,  which  society, 
or  government,  which  is  its  agent,  may  exert,  that  shall 
increase  the  convenience  of  whatever  may  be  used  as  a 
circulating  medium. 

This  agency  has  reference  to  two  circumstances. 

1.  Whenever  any  substance  has  been  found  univer- 
sally adapted  to  the  purposes  of  exchange,  it  is  important 
that  it  should  be  used  by  all  men,  unless  something  to 
the  contrary  be  specified  by  particular  contract.  If  I 
owe  a  man  for  a  hat,  and  when  I  come  to  pay  him,  he 
demand  payment,  not  in  silver,  but  in  beaver  skins,  I 
may  not  be  able  to  procure  them,  and  he  may  nold  mo 
his  debtor,  and  imprison  me  accordingly.  If  I,  instead 
of  paying  him  in  silver,  offer  him  leather,  and  declare 
that  I  will  pay  him  in  nothing  else,  he  will  be  defrauded 
out  of  his  due.  Now,  to  prevent  disputes  without  end, 
it  is  desirable  that  something  be  fixed  upon,  of  which 
tlfe  tender  shall  discharge  forever  the  debtor's  obliga- 
tion. And  as  this  would  most  naturally  and  most  justly 
be  the  substance  which  all  men  have  chosen  for  a  circu- 
lating medium,  this  is  most  properly  chosen.  Hence, 
Boo'ety  or  government  have  a  right  to  establish  tho' 
19 


218  \GENCY    OF    GOVER^ME?IT. 

precious  metals  as  a  legal  tender;  that  is,  to  enact,  that 
if  a  man  declare  that  I  owe  him  ten  dollars,  and  I  oiler 
liim  ten  silver  dollars,  if  he  choose  not  to  receive  them, 
I  am  under  no  obligation  to  give  myself  any  n'ore 
trouble  about  it.  The  tender,  on  my  part,  is  a  full  re- 
lease. I  am  under  obligation  to  offer  nothing  else  ;  and 
he  has  no  right  to  demand  any  thing  else.  Nor  is  there, 
in  this,  any  oppression.  If  a  man  wish  to  be  paid  in 
something  besides  money,  he  can  always  specify  it  in  the 
contract  ;  and  thus  his  object  can  be  accomplished. 
The  whole  effect  of  such  a  law  is,  to  prevent  disputes, 
and  to  enact  what  shall  be  a  full  and  valid  release  frcm 
obligation,  when  nothing  specific  has  been  agreed  upon. 
But,  secondly  :  If  any  substance  be  used  as  a  circu 
lating  medium,  it  is  evident  that  its  utility  will  be  great- 
ly increased  by  several  circumstances.  Of  these,  the 
principal  are  :  — 

1 .  That  it  be  of  uniform  purity.  Were  it  otherwise, 
every  piece  must  be  tested  by  chemical  analysis.  This 
would  be,  of  course,  impossible  ;  and  hence  its  utility 
would  be  greatly  diminished. 

2.  That  it  be  divided  into  portions  of  such  a  size,  as 
shall  be  most  convenient  for  the  purposes  of  exchange. 
Were  coins  a  foot  in  diameter,  or  as  small  as  the  head 
of  a  pin,  they  would,  in  either  case,  be  almost  useless. 
The  former  could  be  used  only  in  large  exchanges  ;  the 
latter  would  be  so  small  as  to  be  frequently  lost,  and  of 
so  small  a  value  as  to  consume  a  2;reat  deal  of  time  ir 
counting  them. 

3.  That  it  should  be  so  prepared^  that  each  piece 
shall,  on  inspection,  indicate  its  value,  and  also  indicate 
that  no  change  has  been  effected  in  that  value,  by  de- 
sign. To  give  to  the  precious  metals  these  qualifica- 
tions, is  the  intention  of  coining. 

But  it  is  evident,  from  a  moment's  consideration,  that 
the  preparation  of  coin,  in  this  manner,  for  the  pnbtic 
use,  could  never  be  safely  entrusted  to  individuals. 
The  f^mptations  to  dishonesty  are  too  great  for  ordinary 
human  virtue.  It  is  evident,  that  such  a  work  should 
be  executed  by  those,  whose  interest  would  lead  them 


AGENCY    OF    GOVERNMENT.  2f9 

Jo  perform  it  with  the  greatest  possible  fidehty.  Hence 
it  is,  that  individuals  liave,  in  all  civilized  countries,  suv 
rendered  the  right  of  coining  money  to  the  whole  soci- 
ety, that  is,  to  government ;  and  governments  have  exe- 
cuted it  by  means  of  agents  appointed  for  that  purpose. 
These  agents  should  always  be  placed  under  such  cir- 
cumstances,  that  their  interest  is  strongly  on  the  side  of 
honesty  ;  and  the  supervision  over  them  should  be  of 
such  a  nature,  that  any  failure,  either  of  skill  or  of  in- 
tegrity, could  be  easily  detected. 

Such  are  the  limits,  within  which  the  powers  of  gov- 
ernment, in  respect  to  money,  are  restricted  ;  and  such 
is  the  reason,  for  which  this  power  is  conferred.  Of 
the  manner  in  which  a  government  should  execute  this 
trust,  it  is  only  necessary  to  add  a  few  remarks. 

1.  It  is  the  business  of  the  government  to  regulate 
the  purity  of  money.  Inasmuch,  however,  as  this 
whole  power  is  conferred  for  the  public  convenience, 
the  exercise  of  this  power  should  never  be  on  the  ground 
of  arbitrary  enactment,  but  of  public  convenience. 
Thus,  as  money  is  liable  to  loss  from  wear,  and  as  this 
loss  is  rendered  less  by  the  addition  of  a  small  portion 
of  alloy,  which  renders  it  harder  ;  and,  also,  as  the  puri- 
fication of  the  precious  metals  from  all  alloy,  would  be 
a  process  of  great  and  useless  expense,  it  is  for  the  con- 
venience of  all  parties,  that  some  portion  of  alloy  should 
be  allowed  to  remain  when  the  metal  is  prepared  for 
coining.  The  degree  of  this  adulteration  should,  how- 
ever, be  fixed  by  law,  and  should  thus  be  publicly 
known,  and  should  be  invariable. 

2.  The  government  should  regulate  the  size  and  form 
of  the  coin. 

The  size  of  the  pieces  should  be  such,  as  shall  best 
adapt  them  to  the  purposes  of  exchange. 

Their  relative  proportions  to  each  other,  should  be 
6uch  as  to  adapt  them  most  conveniently  to  the  purposes 
of  enumeration.  On  this  account,  the  decimal  system, 
adopted  by  the  United  States,  is  probably  preferable  to 
any  other.  The  size  having  been  once  fixed  'ipon,  il 
should  remain  invariable. 


220  AGENCY    OF    GOVERNMENT. 

In  respect  to  the  form  of  money,  we  may  add  : 

1.  It  should  be  adapted  to  convenience  for  counting 
On  this  account,  flat  coins  are  always  preferred. 

2.  It  should  present  the  least  possible  surface  to  fric- 
tion. On  this  account,  the  thicker  the  pieces  are,  the 
better,  provided  they  be  not  inconvenient  for  piling. 

3.  The  whole  surface,  or  so  much  of  it  as  is  possible, 
should  be  so  ornamented,  that  if  any  of  the  metal  should 
be  feloniously  filed,  or  worn  away,  it  may  easily  be  dis- 
covered. For  the  same  reason,  the  edges  should  alvvayt^ 
be  milled. 

4.  To  reduce  the  amount  of  friction,  as  much  as  pos- 
sible, the  rim  of  the  edge  should  be  so  raised  as  to  pro- 
tect the  face. 

It  would  be  of  advantage,  also,  if  the  amount  of  pure 
metal  in  every  piece  were  glways  stamped  upon  its  face. 
This  would  be  an  additional  check  against  any  interfer- 
ence on  the  part  of  government,  with  the  purity  or  the 
weight  of  coin.  It  would  also  allow  persons  entering 
mto  contracts,  to  make  them  either  in  weight  or  in  de- 
nomination, as  they  chose  ;  and  thus,  give  them  addi- 
lional  means  of  protection  against  interference  of  this 
sort,  even  if  were  attempted. 

Inasmuch  as  a  piece  of  metal  coined  is  worth  more 
than  a  piece  uncoined  ;  that  is,  as  it  has  additional  value, 
derived  from  the  means  of  verification  conferred  upon 
It  ;  as  this  additional  value  is  the  property  of  the  owner, 
and  as  the  conferring  of  it  is  a  costly  operation,  it  is 
right  that  the  owner  should  pay  for  it.  Were  nothing 
charged  for  it,  as  it  is  worth  more  when  coined  than 
when  uncoined,  when  it  could  not  profitably  be  sent 
abroad  in  one  form,  it  niighi  be  so  sent  in  the  other 
form  ;  hence,  when  it  could  not  be  sent  in  bullion,  it 
might  be  coined,  and  sent  away  in  money.  Hence, 
there  would  be,  in  such  a  case,  a  premium  given  to  its 
exportation.  But,  on  the  other  hand,  the  charge  for 
ihis  operation  should  be  just  sufficient  to  defray  the  ex- 
penses of  the  work.  If  more  than  this  is  charged,  so 
that  coining  would  be  a  profitable  business,  it  would 
scon  be  done  by  private  mdividuals,  for  gain  ;   and  the 


'  AGENCY    OF    GOVERNMfNl. 

country  would  be  flooded  with  coin  made  in  other  coun- 
tries, and  be  thus  liable  to  great  imposition.  The  gov- 
ernment would  thus  soon  lose  the  business.  If  it  be 
done  at  the  lowest  practicable  price,  as  no  one  can 
make  any  thing  by  the  operation,  all  temptation  to  pri- 
vate coining  is  taken  away. 

Inasmuch  as  money  is  liable  to  continual  wear  from 
friction,  and  as  it  is  thus  steadily,  though  slowly,  dimin- 
ished in  value,  it  at  last  becomes  so  much  worn,  as  to 
be  unfit  for  circulation  ;  because  its  impression  is  ef- 
faced, and  also  because  it  contains  much  less  than  the 
standard  quantity  of  metal.  When  it  becomes  thus  unfit 
for  circulation,  on  whom  is  the  loss  to  fall,  on  the  last 
holder,  or  on  the  whole  community  ?  Doubtless,  on 
the  latter.  The  last  holder  has  derived  no  more  benefit 
from  it,  than  any  one  of  the  thousand  holders,  each  one 
of  whom  has  contributed,  by  using  it,  to  depreciate  its 
value  ;  and  there  is  no  reason  why  he,  in  preference  to 
Any  other,  should  bear  the  whole  loss.  In  other  words, 
(vorn-out  coin  should  always  be  received  at  the  mint,  at 
par,  and  exchanged  for  new.  This  remark,  however, 
should  apply  only  to  worn-out  coin  ;  and  not  to  coin 
which  has  been  fraudulently  diminished  in  value. 
Pierced  or  clipped  coin,  should  not  be  exchanged. 
This  will  tend  to  prevent  every  one  from  receiving  it ; 
and  will  thus  tend  to  keep  it  in  the  hands  of  those  who 
have  robbed  it  of  a  part  of  its  value. 

If  such  be  the  agency  which  a  government  is  called 
upon  to  exert,  in  respect  to  a  circulating  medium,  it  will 
be  seen  that  it  has  no  right  to  interfere  in  any  other  re- 
spects.    Hence,  for  instance  : 

1.  It  has  no  right  to  prevent  the  exportation  or  im- 
portation of  specie.  Tliis,  like  any  other  commodity, 
if  let  alone,  will  regulate  itself.  Specie  will  never  be 
sent  abroad,  unless  it  be  for  the  advantage  cf  the  coun 
try  that  it  should  be  so  sent  abroad.  The  actual  mone- 
tary condition  of  a  country  cannot  be  afiected  by  arbi- 
trary acts.  Besides,  a  man  has  the  same  right  over 
whatever  siher  or  gold  he  may  possess,  as  he  has  ovei 
cotton,  or  wool,  or  any  thing  else  ;  and  he  has  just  the 
19* 


222  AGB^iCr    V*     GOVERNMENT. 

same  right  to  exchange  it  with  any  one,  and  fur  any 
thing,  as  he  mav  think  for  his  advantage. 

2.  A  government  has  no  right,  arbitrarily,  to  aher 
the  value  of  money  ;  that  is,  to  say  that  a  dollar  shall 
contain  either  more  or  less  silver  than  it  now  contains. 
To  do  so,  is,  of  necessity,  to  interfere  with  private  con- 
iracts  ;  and  thus  to  expose  one  half  of  the  community,  a 
prey  to  the  dishonesty  of  the  other  half.  If  A  have 
promised  to  pay  B  one  thousand  dollars  ;  meaning,  by 
this,  one  thousand  ounces  of  silver;  and  the  govern- 
ment enact  that  the  dollar  shall  hereafter  contain  only 
half  an  ounce  of  silver,  and  oblige  B  to  receive  half 
ounces,  instead  of  ounces  ;  they  defraud  him  of  pre- 
cisely half  his  due.  This  will  be  the  case,  not  only 
with  B,  but  with  all  the  creditors  in  the  whole  commu- 
nity. It  is  just  the  same  interference,  as  though  they 
should  enact,  that  a  debt  of  one  thousand  bushels  of 
wheat  should  be  paid  with  five  hundred  bushels  ;  or, 
that  a  debt  of  a  yard  of  broadcloth  should  be  paid  with 
half  a  yard. 

If,  however,  the  coin,  by  common  consent,  is  found 
to  need  a  change  of  any  kind,  and  the  public  conven- 
ience actually  require  it,  it  is  to  be  done  by  common 
consent,  after  sufficient  notice  of  the  change  has  been 
given,  and  be  so  done,  that  all  contracts  existing  at  the 
time,  be  left  inviolate.  If  the  amount  of  silver  in  a  dol- 
lar, in  this  country,  should  ever  be  changed,  it  should 
be  effected  by  exchanging,  at  the  mint,  the  present  dol- 
lar, at  its  value  in  silver,  for  a  new  dollar,  at  t^^  value  in 
silver  ;  so  that  all  contracts  now  in  existence,  should  be 
fulfilled  according  to  the  terms  of  the  agreement.  A 
still  better  method  would  probably  be,  to  issue  a  new 
coin,  with  another  name.  This,  I  believe,  has  lately 
been  done  in  Great  Britain.  Instead  of  the  guinea,  of 
twenty-one  shillings,  a  gold  coin,  of  twenty  shillings,  has 
been  introduced,  called  a  sovereign. 

3.  A  government,  I  think,  has  no  right  to  fix  the  rel- 
ative value  between  the  precious  metals.  This  cannot 
be  done,  in  fact,  because  the  relative  value  is  liable  to 
continual  fluctuation.     If  both  are  a  legal  tender,  the 


AGENCY    OF    GOVERNMENT.  223 

debtor  has  the  right  of  paying  in  that  which  he  prefers  , 
and,  as  he  may  be  always  expected  to  choose  to  pay  in 
the  cheaper,  he  may  thus  frequently  defraud  his  creditor 
to  the  amount  of  the  fluctuation.  It  is  better  to  havo 
but  one  a  legal  tender,  and  leave  the  other,  as  any  other 
matter  of  merchandise,  to  be  exchanged  by  special  con- 
tract between  the  parties.  In  this  respect,  I  think  the 
system  of  Great  Britain  preferable  to  our  own.  Gold, 
as  has  been  remarked,  is  there  the  only  legal  tender,  for 
all  sums  above  twenty  shillings  ;  and  silver,  for  all  sums 
below  that  amount.  Hence,  whenever  contracts  are 
made,  their  amount  determines  the  metal,  in  which  the 
payment  is  to  be  made. 

Mr.  Condy  Raguet,  in  his  last  treatise  on  currency 
and  bankmg,  has,  we  think,  conclusively  shown,  that 
the  present  law  fixing  the  relative  values  of  silver  and 
gold  in  this  country,  is,  in  every  respect,  injurious.  Its 
tendency,  clearly,  is,  (b  drive  the  one  or  the  other  metal 
out  of  the  country,  and  thus  to  diminish,  instead  of  in- 
creasing, the  amount  of  specie  in  circulation.  And» 
besides,  inasmuch  as  the  legal  tender  in  Great  Britain  is 
gold,  it  would  be  much  better  that  ours  should  be  silver. 
A  scarcity  of  specie  in  one  country,  would  thus  be  less 
felt  in  the  other.  This  is  a  consideration  of  great  mo- 
ment where  two  nations  are  so  closely  connected  as  this 
and  (jreat  Britain.  As  we  are  at  present  situated,  the 
least  variation  in  one  country  is  immediately  felr  in  the 
other. 


CHAPTER  THIRD. 

OF    A    CfRCULATION    BY    MEANS    OF    A    PAPER 
CURRENCY. 


SECTION  I. 

OF  THE  NATURE  OF  BANKS  IN  GENERAL. 
BANKS  OF  DEPOSIT  AND  EXCHANGE. 

We  have  already  treated  somewhat  at  large  upon  the 
subject  of  division  of  labor  ;  the  circumstances  in  our 
constitution  by  which  it  is  introduced  ;  and  the  benefits 
which  result  to  every  class  of  the  community  from  its 
mtroduction.  We  have  also  seen,  that  division  of  labor 
IS  always  carried  on  most  successfully,  when  it  is  united 
with  the  use  of  some  natural  agent.  Thus,  in  the  man- 
ufacture of  cotton,  by  the  union  of  steam  or  water  power 
and  machinery,  with  division  of  labor,  production  is 
greatly  increased  ;  and  every  class  of  society  is  en- 
riched. And  we  have  also  seen,  that  the  one  could  not 
be  carried  to  great  perfection,  without  the  employment 
of  the  other  ;  and  also  that,  in  the  nature  of  things,  the 
one  actually  suggests  and  renders  necessary  the  employ- 
ment of  the  other. 

Now,  all  these  remarks  apply,  with  the  same  force,  to 
the  labor  of  exchange,  as  to  any  other  labor.  From  the 
necessities  of  society,  it  is  evident  that  a  very  large  por- 
tion of  its  labor  must  be  the  labor  of  exchange.  The 
increase  of  this  labor  would  naturally  lead  to  the  discov- 
ery of  some  natural  agent,  by  which  it  might  be  exe- 
cuted at  less  expense  of  time  and  industry.     At  first, 


BANKS  OF  TEPOSIT  AND  EXCHANGE.     22b 

the  rudest  instruments,  such  as  cattle,  and  tlie  basei 
meials,  were  employed.  These  gradually  gave  place  to 
the  more  perfect  instruments,  gold  and  silver.  As  the 
use  of  this  more  productive  instrument  increased  very 
greatly  the  number  of  exchanges,  and  thus  requited 
more  laborers,  instead  of  fewer,  in  this  department  of 
industry,  it  was  natural,  in  the  next  place,  that  divisirais 
of  labor  should  be  introduced,  in  order  to  use  the  instru- 
ment, or  natural  agent,  with  the  greatest  degree  of  suc- 
cess ;  and  also  to  accomplish,  with  a  given  amount  of 
industry,  the  greatest  amount  of  exchanges. 

Division  of  labor,  in  this  department  of  industry,  as  in 
every  other,  has  proceeded  from  rude  beginnings,  to 
greater  and  greater  perfection.  At  first,  its  benefits 
were  but  imperfectly  appreciated.  By  experiment, 
they  were  more  and  more  unfolded  ;  and  now,  although 
its  principles  may  not  be  generally  understood,  yet,  it  is 
coming  into  very  general  use  throughout  the  civilized 
world.  Instead  of  banks  in  none  but  the  great  marts  of 
trade,  as  was  the  case  a  century  or  two  ago,  we  find 
them,  in  free  states,  employed  in  towns  and  villages, 
over  the  whole  community  ;  and,  when  judiciously  ad- 
ministered, their  effects  are  the  same  upon  the  small,  as 
upon  the  great  sections  of  the  community. 

The  word  bank.,  is  said  to  be  of  Italian  origin.  "  In 
the  infancy  of  European  commerce,  the  Jews  in  Italy 
were  wont  to  assemble  in  the  market  places  of  the  prin- 
cipal towns,  seated  on  benches,  ready  to  leid  money  ; 
and  the  term  bank,  is  derived  from  the  Italian  word 
banco,  a  bench."  When  any  of  these  money-lenders 
failed,  his  bench  was  broken.  Hence,  the  origin  of  the 
word  bankrupt. 

1.  We  have  shown  how  very  great,  in  a  ci\ilized 
country,  must  be  the  amount  of  exchanges.  We  have 
also  shown  that  these  exchanges  are  greatly  facilitated 
by  means  of  the  uie  of  a  metallic  currency.  But  it  will 
be  evident,  that,  were  the  labor  of  exchange  divided  no 
more  perfectly  than  we  have  thus  far  supposea,  a  variety 
of  inconveniences  would  unavoidably  occur.  Among 
these  are  the  following: 


326     BANKS  OF  DEPOSIT  AND  EXCHANGE. 

1.  Were  men  thus  to  keep  on  hand  so  large  an 
amount  of  the  precious  metals,  and  actually  to  make 
their  exchanges  by  means  of  metallic  transfer,  much  time 
would  be  consumed  in  transportation.  A  large  number 
of  persons  must  be  employed  constantly,  in  no  other 
business  than  in  carrying  silver  and  gold  from  one  mer- 
chant to  another,  in  the  same  place,  and  between  the 
merchants  in  different  places. 

2.  Were  exchanges  to  be  made  directly,  through  the 
medium  of  money,  it  is  evident  that  every  payment  must, 
of  necessity,  be  counted  by  both  parties.  This,  in 
large  payments,  would  consume  much  time,  and  cause 
great  wear  and  tear  of  the  coin.  Were  a  large  mercan- 
tile house,  which  transacts  exchanges  to  the  amount  of 
from  ten,  to  one  hundred  thousand  dollars'  worth  in  a 
day,  obliged  to  count  all  the  money  paid  and  received, 
every  one  must  see  that  more  than  thrice,  the  present 
number  of  agents  must  be  employed  ;  and  thus,  the  ex- 
penses of  the  establishment  would  be  greatly  increased. 
The  effect  of  this  additional  expense  of  labor,  would  be 
very  greatly  to  increase  the  cost  of  exchanges  ;  thafis, 
the  price  of  products. 

3.  The  precious  metals  are  small  in  bulk,  and  there- 
fore, are  very  liable  to  be  stolen.  The  pieces  of  the 
same  denomination  being  of  precisely  the  same  form  and 
impression  ;  if  stolen  they  cannot  be  identified.  Hence, 
more  than  usual  care  is  necessary,  in  order  to  secure 
them  against  robbery.  Were  every  individual,  there- 
fore, to  keep  on  his  premises,  the  whole  amount  of  the 
precious  metals  necessary  to  effect  his  exchanges,  every 
one  would  be  obliged  to  guard  his  property  with  increas- 
ed vigilance,  both  by  day  and  by  night.*  He  would  be 
hij  own  banker,  and  must  add  to  his  present  expenses, 
all  those  expenses  necessary  to  the  security  of  a  bank. 

But  let  us  now  see  by  how  simple  an  arrangement  all 
these  difficulties  might  be  obviated.     Suppose  this  labor 


"  It  is  appropriate  here  to  remark,  that  the  establishment  of  banki 
has,  on  this  account,  greatly  diminished  the  frequency  of  the  crimes 
of  house-bri?.'i!»iii<f  and  highway  robbery. 


BANKS  OP  DEPOSIT  AND  EXCHANGE.     227 

were  divided,  and  that  all  the  merchants  in  a  town,  in- 
stead of  being  every  one  his  own  banker,  agreed  togeth- 
er to  employ  a  single  person  to  become  the  banker  for  ah 
of  them.  Let  us  suppose  this  person  to  procure  a  safe 
repository  for  all  the  specie  in  the  neighborhood,  and  to 
become  responsible  for  its  safe  keeping.  Suppose,  also, 
that  these  merchants,  instead  of  keeping  their  money 
themselves,  all  lodged  it  with  him,  and  that  he  opened 
an  account  with  each  one,  crediting  him  with  whaievei 
he  deposited,  and  debiting  him  to  all  that  he  withdrew  ; 
and  that  every  one  was  at  liberty  to  withdraw,  at  any 
moment  he  chose. 

It  is  manifest,  that  in  such  a  case,  if  A  owed  B  one 
thousand  dollars,  he  would  not  send  to  the  bank  and 
withdraw  the  money  for  B  to  replace  it  again,  but  would 
give  to  B  an  order  for  one  thousand  dollars,  which  B 
would  present  to  the  banker,  and  the  one  thousand  dol- 
lars would  be  withdrawn  from  A's  account,  and  added  to 
that  of  B.  If  B  owed  C,  he  would  do  the  same.  C 
would  do  the  same  to  D,  and  perhaps  D  would  owe  A, 
and  would  pay  him  in  the  same  manner.  At  the  close 
of  the  day,  their  bank  accounts  would  stand  just  as  they 
were  at  the  beginning  ;  and  yet  there  have  been  four  pay- 
ments made  and  received,  of  one  thousand  dollars  each. 
Yet,  not  one  cent  of  the  specie  has  been  touched.  Not 
a  dollar  of  it  has  been  counted.  It  has  been  all  done 
by  a  few  entries  made  on  the  books  of  the  bank,  and 
done  in  a  very  few  minutes.  In  this  manner  the  writing 
of  a  few  lines  saves  all  the  labor  of  repeated  transporta- 
tion, of  as  frequent  counting  of  coin,  and  also  all  the 
cost  of  wear  which  must  arise  from  every  such  opera- 
tion. Besides,  inasmuch  as  no  more  vigilance  is  neces- 
sary tQ  secure  from  depredation  the  whole  sum  of  specie 
than  any  one  part  of  it,  it  is  evident  that  great  additional 
labor  is  saved  in  this  respect  also. 

Suppose,  now,  the  business  of  this  society  to  become 
so  extensive,  that  one  banker  is  unable  to  transact  the 
operation  of  all  of  these  transfers,  and  another  is  also 
employed,  who  opens  another  banking-house  on  the  same 
principles.     If  we  bear  in  mind  the  fact,  thai  (he  pur- 


BANftS    OF    DEPOSIT    AND    EXCHANGE. 

chases  and  sales  must,  in  the  end,  be  equal  to  each  oth 
er ;  that  is,  that  every  man  receives  as  much  money  as  he 
pays  auay^  the  transactions  of  the  day  must,  as  before, 
equahze  each  other.  If  both  parties  transact  their  busi- 
ness at  the  same  bank,  this,  as  it  has  been  just  sho\vn,  will 
be  the  case.  If  they  transact  their  business  at  different 
banks,  it  will  but  slightly  difler.  A  pays  B  in  a  draft  on 
the  first  bank,  which  B  deposits  in  the  second  bank.  B 
pays  C  in  a  draft  on  the  second  bank,  which  C  deposits  in 
the  first  bank.  At  the  close  of  the  day,  these  banks  ex- 
change drafts,  and  thus,  without  any  labor  or  counting,  or 
transportation,  by  merely  writing  a  few  words  in  a  bank  leg- 
er,  the  whole  transaction  is  completed.  It  is  hardly  possi- 
ble to  find  a  case,  in  which,  by  the  division  of  labor,  a  great- 
er increase  of  productiveness  is  given  to  human  industry. 
Now  the  case  will  be'  the  same,  if  we  consider  the  in- 
tercourse between  different  cities  and  different  countries, 
or  in  different  countries.  It  is  to  be  borne  in  mind,  that 
the  sales  and  purchases  of  every  society,  as  well  as  of 
every  individual,  must  be,  substantially,  equal.  The 
reason  is  obvious  ;  for  a  man  can  buy  only  as  much  as  he 
can  pay  for  ;  and,  as  much  as  he  can  pay  for,  he  will  gen- 
erally buy  ;  and,  if  he  buy  skilfully,  he  will  lose  nothing 
by  the  exchange.  In  other  words,  all  exchange  is  ulti- 
mately and  substantially  exchange  in  kind.  And,  as  the 
things  exchanged  are,  at  the  place  of  exchange,  of  equal 
value,  the  purchases  and  sales  must  be  equal  to  each  other. 
If  Boston  buy  ten  million  dollars'  worth  of  New  York, 
it  must  send  ten  million  dollars'  worth  with  which  to  pay 
for  it.  If  both  parties  made  these  exchanges  by  means 
of  money,  not  only  the  goods,  but  also  the  money,  must 
ne  transported  to  and  fro,  at  every  exchange.  By  a  very 
simple  arrangement  all  this  trouble  may  be  avoided 
Thus,  for  instance,  suppose  A,  in  Boston,  sells  to  B, 
in  New  York,  ten  thousand  dollars'  worth  of  domestic 
cottons  ;  he  is  entitled  to  draw  on  B  for  that  amf  int  ; 
tl.at  is,  to  order  him  to  pay  it,  to  whomsoever  he  will. 
Again  :  Suppose  C,  in  New  York,  sells  to  D,  in  Bos- 
ton, ten  thousand  dollars'  worth  of  French  silks  ;  he,  in 
b'ke  manner,  is  authorized  to  draw  on  D,  for  that  sum. 


BANKS  OF  DEPOSIT  AND  EXCHANGE.     229 

A  sells  his  draft  on  B,  to  a  bank  in  Boston,  that  is,  he 
receives  in  Boston  the  money  due  to  him  in  New  York. 
C  sells  to  a  bank  in  New  York  the  draft  on  Boston, 
that  is,  he  receives  in  New  York,  the  money  due  to  him 
i.i  Boston.  The  banks  exchange  these  drafts  with  each 
other,  and  collect  the  proceeds,  receiving  a  percentage 
for  their  trouble.  Thus,  these  debts  mutually  cancel 
each  other,  without  removing  the  specie  from  one  place 
to  the  other  ;  and  with  only  the  labor  of  making  a  few 
entries  in  a  leger.  In  this  manner  the  amount  of  money 
necessary  to  perform  the  exchanges  of  a  country  is 
greatly  diminished,  and  all  the  loss  to  which  money  in 
transitu  is  exposed,  is  avoided. 

We  see,  therefore,  that  if  the  exchanges  between  two 
places  were  equal,  the  whole  business,  of  payment  might 
be  made  without  the  transfer  of  any  specie  whatever. 

But  suppose  the  business  between  two  places  were, 
not  equal;  that  is,  suppose  that  Boston  purchased  of  New 
York  more  than  it  sold  to  that  place  ;  suppose,  for  m- 
stance,  that  Boston  purchased  of  New  York  ten  million 
dollars'  worth,  and  sold  to  that  place  only  five  million 
dollars'  worth.  In  this  case,  one  half  the  payments 
would  be  made  in  productions,  in  the  manner  we  have 
already  suggested.  The  remaining  five  millions  must, 
however,  be  provided  for,  in  some  other  way.  One  ob- 
vious way  would  be,  to  send  this  remainder  in  specie. 
But,  it  will  be  asked,  how  is  this  five  millions  of  specie 
to  be  provided  ?  We  answer,  by  sending  the  five  mil- 
lions of  products  which  would  otherwise  have  been  sent 
to  New  .York,  to  some  other  place,  where  specie  can 
be  had  at  the  cheapest  rate  ;  and  thus  paying  for  what 
we  have  purchased  at  New  York,  by  two  exchanges  in- 
stead of  one.  This  is  one  method.  Another  method 
would  be,  for  Boston  to  send  five  millions  of  her  do- 
mestic products  to  some  other  market,  say  to  the  West 
Indies,  and  exchange  it  for  some  other  product,  say  cof- 
fee, or  sugar ;  and  remit  these  to  New  York,  to  pay  the 
balance  of  her  debt.  This  woulc'  be  sold,  the  proceeds 
deposited  in  New  York,  and  he  who  owed  the  New  York 
merchant  would  purchase  a  draft  in  Boston,  of  him  who 
20 


230     BANKS  OF  DEPOSIT  AN£  EXCHANGE. 

had  in:ported  the  coffee  or  sugar  ;  and  thus  tho  debt 
would  be  liquidated. 

Now,  it  is  manifest,  that  it  is,  to  Boston,  of  no  con- 
sequence in  which  way  she  pays  this  debt  ;  wheihei  by 
sending  directly  to  New  York  ten  millions  of  her  piod- 
uc(s  ;  by  sending  five  millions  to  New  York  and  five 
millions  to  South  America  in  exchange  for  specie  ;  or 
by  sending  five  millions  to  New  York  and  five  millions  to 
Cuba  in  exchange  for  coffee  and  sugar.  In  either  case, 
she  pays  but  ten  millions  ;  and  the  way  in  which  it  is 
paid  is  a  matter  of  indifference.  And  it  is,  also,  obvious 
in  which  manner  Boston  will  choose  to  pay  her  debt. 
Every  one  who  has  a  debt  to  pay,  will  pay  it  in  that 
which  will  liquidate  it  at  the  least  expense  to  himself. 
If  five  millions  of  specie  can  be  procured  by  four  and  a 
half  millions  of  other  products,  it  will  be  best  to  pay  the 
debt  in  specie.  If  sugar  and  coffee  worth  five  millions 
in  New  York,  can  be  purchased  by  four  and  a  half  mil- 
lions' worth  in  Boston,  she  will  choose  to  import  cod'ee 
and  sugar  in  payment.  And  thus,  the  account  will  be 
adjusted,  in  every  case,  according  to  the  interests  and 
conveniences  of  the  respective  parties  ;  that  is,  of  the 
whole  community. 

This  is  the  case,  if  we  take  into  consideration'  (wo 
trading  places  in  the  same  country.  But  the  case  is  (he 
same  with  the  trading  cities,  over  the  whole  world.  And 
by  thus  allowing  every  thing  to  regulate  itself,  the  whole 
business  of  exchange  is  adjusted. 

Suppose,  for  instance,  that  Great  Britain  has  pur- 
chased of  us  more  than  we  receive  in  return.  There 
will  then  be  a  portion  of  her  debt  unpaid  ;  and  there 
will  (hen  be  a  demand  for  something  wherewith  to  oj:y 
It.  In  this  case,  drafts  on  America  will  rise  ;  that  i^, 
I  boss  who  have  payments  to  make  will  overbid  ca<h 
i'iher,  and  drafts  will  increase  in  price.  In  this  case,  a 
French  merchant,  who  has  sent  a  cargo  of  silks  to  Amer- 
ica, will  find  that  ho  can  get  more  for  it,  by  selling  in 
London,  drafts  on  his  correspondent  in  New  York,  than 
by  importing  American  produce.  In  this  case,  he  will 
sell  to  the  London  merchant  drafts  to  the  whole  amouni 


BANKS  OF  DEPOSIT  AND  EXCHANGE.     231 

ol  his  cargo  ;  that  is,  England  pays  France,  for  sending 
lo  America  sufficient  produce  to  pay  the  deficiency 
which  she  is  unable,  profitably,  to  supply  fi^om  her  own 
productions.  In  this  manner,  the  deficiency  of  the  ex- 
ports of  the  first  country  to  the  second,  is  made  up  by 
the  excesses  of  a  third  ;  and,  as  every  one  receives  as 
much  as  he  pays  out,  and  imports,  on  the  whole,  as 
much  as  he  exports,  by  free  communication  among  them- 
selves, the  balance  is  speedily  adjusted. 

Hence,  bills  of  exchange,  or  orders  of  payment  for 
goods  already  delivered  at  any  particular  place,  become 
an  article  of  merchandise,  as  much  as  any  thing  else. 
This  being  the  case,  it  is  of  importance  that  some  per- 
sons should  devote  themselves  to  this  branch  of  labor. 
By  these  means,  both  parties  know  how  they  can  be 
best  accommodated.  The  sellers  know  where  to  sell, 
and  the  buyers  where  to  purchase.  For  the  transaction 
of  this  business,  banks  have  great  facilities,  on  account 
of  the  capital  which  they  can  command,  and  the  commu- 
nication, which,  for  other  reasons,  they  of  necessity  hold 
with  each  other,  and  hence  they  are  most  commonly  thus 
employed.  Almost  all  our  domestic,  and  much  of  ou) 
foreign  exchange  is  negotiated  at  present  by  means  of 
banks.  They  act  as  brokers,  by  bringing  buyers  and 
sellers  together,  and,  by  reason  of  their  communication 
with  each  other,  they  are  enabled  to  transact  the  busi- 
ness of  exchange  of  drafts  with  great  security  and  at  lit- 
tle expense. 

Such,  I  suppose  to  be  some  of  the  principal  functions 
of  banks,  as  offices  of  deposit.  They,  by  means  of  di- 
vision of  labor,  diminish  the  amount  of  the  circulating 
medium  necessary  to  carry  on  the  exchanges  of  a  coun- 
try ;  they  greatly  diminish  the  labor  of  transpnitation 
and  of  counting  money  in  the  same  place,  and  almost 
remove  the  necessity  of  transporting  it  between  difl'erent 
places. 

The  Bank  of  Amsterdam  was  purely  a  bank  of  de- 
posit. It  received  the  specie  of  the  merchants  of  the 
city,  ^nd  gave  them  acknowledgments,  which  were 
transferable,  like  specie  ;  and,  by  the  transfer  of  these. 


232  BANKS    OF   DISCOUNT    OR    LOAN. 

on  the  books  of  the  bank,  all  large  payments  were  uni- 
versally made.  And  so  great  was  the  confidence  in  the 
management  of  the  bank,  that  certificates  of  these  de- 
posites  were  current  throughout  Europe.  Adam  Smith 
attributes  the  origin  of  this  bank,  to  the  desire  of  the 
Dutch  to  prevent  their  coin  from  migrating  into  the  sur- 
rounding states,  and  being  replaced  by  the  inferior  and 
debased  coin,  with  which  they  were  liable  to  be  inun- 
dated. That  this  might  have  been  the  idea,  from  which 
the  first  conception  of  such  a  bank  originated,  is  very 
possible.  But,  whoever  will  observe  the  advantages  of 
such  an  nistitution,  as  they  have  been  stated  above,  must 
be  aware,  that  when  the  transactions  of  a  commercial 
city  became  numerous,  and  the  exchanges  became  ac- 
tive, merchants  could  not  long  fail  of  falling  upon  some 
mstrument  which  their  necessities  so  imperatively  re- 
quired, and  which  all  their  habits  of  thought  would  be  so 
likely  to  suggest. 

From  what  has  been  said,  it  is  obvious,  that  when  all 
other  methods  fail  of  adjusting  the  differences  of  ex- 
change between  two  places,  specie  must  be  procured, 
and  rernitted  from  the  one  to  the  other.  This  will  al- 
vsays  pay  the  debt,  and  equalize  the  exchange.  Hence, 
the  highest  rate  of  exchange,  which,  under  natural  con- 
ditions, is  possible  between  two  countries,  is  that  which 
is  sufficient  to  procure  the  specie,  and  to  remit  it  to  the 
place  of  payment. 


OF    BANKS    OF    DISCOUNT,    OR    LOAN. 

We  have  already  seen,  that  all  production  is  ihc-  re 
suit  of  the  application  of  industry  to  capital.  But  we 
also  see,  that  the  capital  and  the  industry  are  frequently 
ill  the  hands  of  different  persons.  One  has  capital,  but 
does  not  wish  to  labor  with  it  himself.  Another  has  in- 
dustry and  skill,  but  has  no  capital,  with  which  to  create 
products.  It  will  be  at  once  seen,  that  it  will  befl  groat 
aavantage  to  both  parties,  if  the  capitalist  can  loan  his 


BAJVes    OF    DISCOUNT    OR    LOAN.  233 

capital  to  the  laborer,  and  receive  from  him  a  fair  com- 
pensation ;  while  the  laborer,  by  uniting^  capital  with  his 
industry,  will  be  able,  after  paying  this  compensation,  to 
retain  a  handsome  remuneration  for  himself. 

For  the  accomplishment  of  this  result,  the  introduc- 
tion of  a  circulating  medium  presents  great  facilities.  A 
flour  merchant  might  have  more  flour  than  he  wanted, 
and  would  be  willuig  to  loan  it  to  another  person,  who 
wished  to  establish  himself  in  business;  but,  perhaps,  the 
person  who  applies  to  him  for  the  loan,  understands  noth- 
ing but  the  trade  in  iron.  The  capital  of  the  one,  there- 
fore, in  this  case,  could  be  of  no  service  to  the  other. 
But  let  the  flour  merchant  convert  his  flour  into  money, 
and  then  he  can  loan  it  to  any  one  who  needs  it,  no 
matter  what  may  be  the  occupation  in  which  he  hopes  to 
be  the  most  successful. 

As  men  accumulate  capital,  they  are  enabled  thus  to 
loan.  There  are  always  multitudes  of  persons  who  wish 
to  borrow.  But  he  who  is  willing  to  loan,  is  also  fre- 
quently engaged  in  active  business,  and  can  rarely  take 
pains  to  ascertain  the  character  of  the  borrower  ;  neither 
may  he  have  an}'  means  of  so  observing  his  afl^airs,  as  to 
secure  himself,  in  season,  against  the  results  of  dishones- 
ty. Hence,  his  risk  of  loss  would  be  great ;  the  rate  of 
interest  high  ;  the  time  requisite  to  effect  and  to  watch 
over  loans,  great  ;  and  there  would  be,  on  the-  part  of 
the  capitalist,  but  little  disposition  to  part  with  the  im- 
mediate control  of  his  means. 

Thus,  also,  if  a  mechanic  or  merchant  wished  to  bor- 
row of  a  private  capitalist,  he  would  not  know  to  whom 
to  apply  ;  much  time  would  be  lost  in  finding  a  capi- 
talist ;  and,  if  the  capitalist  were  timid  and  suspicioiis, 
it  might  be  utterly  impossible  to  satisfy  him  that  the  je- 
turitj  was  sufficient,  unless  it  were  in  property  with 
which  he  was  acquainted  ;  or,  unless  the  money  were  to 
be  employed  in  operations  with  which  he  happened  to 
be  conversant.  Thus,  a  great  inconvenience  would  be 
6ufl"ered,  both  by  those  who  were  willing  to  lend,  and  by 
those  who  wished  to  borrow  money  ;  that  is,  capital. 

Now,  it  is  obvious,  that  these  inconveniences  would 
20* 


234  BANKS    OP'    DISCOUNT    OR    LOAN. 

De  greatly  relieved,  if,  by  a  division  of  labor,  some  per- 
sons were  set  a^art  for  the  express  purpose  of  loaning 
money.  Tn  this  case,  those  who  had  more  capital  than 
they  wished  to  employ,  would  exchange  it  for  money, 
and  place  it  in  the  hands  of  the  money  lender  ;  and 
those  who  wished  to  borrow  would  go  to  him  foi  such 
accommodations  as  they  needed.  He  would  attend  to 
the  whole  business  of  loaning,  and  collecting  both  the 
principal  and  the  iflterest,  thus  acting  as  the  agent  of  the 
capitalist,  and  receiving  for  himself  a  fair  compensation 
for  his  expenses,  labor,  and  skill. 

In  this  manner,  banks  perform  the  service  of  bringing 
together  the  lenders  and  borrowers,  so  that  he  who  has 
any  thing  to  lend,  can  lend  it,  if  there  be  any  one  who 
wishes  to  borrow  ;  and,  so  that  he  who  wishes  to  bor- 
row, can  borrow,  j)rovided  there  be  any  one  who  wishes 
to  lend.  And  thus,  by  bringing  the  wants  of  both  parties 
to  act  upon  each  other,  each  has  the  advantage  of  loan- 
ing or  of  borrowing,  on  the  most  favorable  terms. 

Nor  is  this  all.  When  this  is  once  accomplished,  the 
whole  may  be  done  in  the  shortest  possible  time  ;  be- 
cause, the  greatest  part  of  the  time,  without  such  an 
arrangement,  would  be  spent  in  bringing  together  two 
mdividuals  who  could  agree  upon  the  loan  in  question. 
Hence,  a  negotiation,  which  might  otherwise  have  taken 
half  a  day  from  the  labor  of  both  parties,  may  now  be 
perfected,  in  a  very  few  minutes.  This  is  a  great  sav- 
ing of  time  and  labor,  and  contributes  greatly  to  the 
punctuality  of  the  whole  community,  which  is  a  still  fur- 
ther saving  of  time  and  caj)ital. 

Besides,  we  have  already  shown,  that  when  a  man  de- 
votes himself  to  any  occupation,  and  to  nothing  else,  he 
will  acquire  i  skill  which  can  never  be  attained  by  him 
who  only  practises  it  occasionally.  This  principle  ap- 
plies with  full  force  to  the  present  case.  He  whose 
only  business  it  is  to  loan  money,  will  keep  himself,  at  all 
times,  acquainted  with  the  state  of  the  money  market  ; 
he  will  ascertain  the  character  and  responsibility  of  the 
individuals  who  are  desirous  of  loans  ;  he  will  be  the  first 
to  ascertain  the  indications  of  their  failure,  either  in  skill 


BAiN'KS    OF    CIRCULATION.  235 

or  in  fidelity  ;  and  will,  therefore,  be  the  best  prepared 
to  decide,  whether  it  be  necessary  to  withdraw  capital 
from  a  debtor.  This  will  be  especially  the  case,  if  there 
be  interested  in  the  management  of  the  funds  thus  collect- 
ed, several  men  engaged  in  general  monetary  operations, 
8nd  who,  therefore,  are  hkely  to  collect  all  the  informa- 
tion on  these  subjects,  that  may  at  any  time  be  afloat  in 
the  mercantile  community. 

Such  is  the  nature  of  banks,  as  offices  of  discount-. 
Some  of  the  private  banks  of  Great  Britain  are  of  this 
character.  They  issue  no  notes  of  their  own,  but  mere- 
ly negotiate  the  bills  of  other  banks,  or  of  the  Bank  of 
England.  ■H)f  the  same  nature,  to  some  degree,  are 
Savings  Banks,  of  which  the  object  is,  to  collect  tlie 
capital  from  small  owners,  and  loan  it  out  at  interest  for 
their  benefit. 


OP    BANKS    OF    CIRCULATION    OR    ISSUE. 

If  banks  were  established  on  the  principles  which  wo 
have  suggested,  and  if  the  depositors  and  contributors 
placed  in  the  hands  of  the  banker,  metallic  currency,  it 
is  evident,  that  the  bankers  or  bank  would  soon  collect 
a  great  part  of  the  metallic  currency  in  the  country. 
Were  this  the  case,  it  is  evident  that  they  might  do  a 
very  considerable  service  to  the  community,  by  furnish- 
ing the  depositor  with  a  certificate  of  deposit,  which  ho 
might  use  instead  of  the  money  which  he  had  deposited. 
Tiius,  if  I  had  deposited  one  thousand  dollars  in  a  bank  in 
Providence,  and  wished  to  use  it  in  New  York,  if  ihc.'ir 
obligation  to  pay  so  much  money  to  my  order  weie  in 
New  York  as  good  as  specie,  I  could  pay  a  debt  in  the 
laitei  place  by  making  over  this  obligation  to  my  creditor 
tliere,  as  well  as  by  transmining  the  specie.  If  a  mer- 
chant in  New  York,  who  owed  the  same  sum  in  Provi 
dence,  pursued  the  same  course,  one  draft  would  bal- 
ance the  other,  and  both  debts  would  be  paid.  Again 
The  bank,  upon  sufficient  security,  might  loan  to  ine  it^ 


836  BANKS    OF    CIRCULATION. 

obligation  to  pay  on  demand,  and  allow  me  to  use  this 
obligation  in  any  place  where  it  might  be  for  my  mterest 
to  do  so.  And  still  more  readily  might  this  be  done,  if 
a  number  of  individuals  had  deposited  in  the  bank  spe- 
cie, for  the  purpose  of  having  it  loaned,  at  stated  rates, 
to  any  persons  who  could  offer  a  reasonable  guaranty 
that  whatever  was  borrowed  would  be,  at  an  appointed 
time,  refunded.  It  is  always  *o  be  understood,  that  the 
bank  obliges  itself  in  all  cases,  to  pay  these  obligations 
to  the  bearer  on  demand,  in  the  precious  metals  ;  and 
(hat  hence,  these  notes  represent  invariably  die  value  in 
the  precious  metals,  which  their  obligation  designates. 
And  thus,  from  the  nature  of  the  case,  a  large  amount 
of  the  money  in  circulation,  would  soon  become  specie 
certificates,  or  notes  of  obligation  of  the  bank.  And 
they  would  get  rapidly  into  circulation,  because  .of  their 
greater  convenience  for  transportation  ;  their  diminished 
liability  to  robbery  ;  and  the  greater  ease  with  which 
diey  could  be  identified  in  case  they  were  stolen. 

But  still  further.  It  is  manifest,  that  many  of  these 
bills  thus  issued  by  banks,  in  this  condition,  would  never 
need  to  be  repaid  in  specie,  but  would  be  cancelled  by 
dri  equal  amount  of  similar  bills  from  other  banks. 
Again  :  Of  those  for  which  specie  was  demanded,  it  is 
impossible  that  it  should  all  be  demanded  at  the  same 
instant.  And  yet  more  :  As  some  persons  were  receiv- 
ing payments  in  specie,  other  persons  would  also  be  de- 
positing specie,  which  would  make  good  the  deficiency 
.vhich  this  withdrawal  occasioned.  Hence,  from  these 
causes  combined,  it  is  evident  that  a  bank  thus  constitut- 
ed, might,  without  violating  its  engagement  to  pay  every 
certificate  or  bill  in  specie,  issue  a  larger  amount  of  such 
obligations,  than  it  at  any  time  contained  of  specie  in  its 
vaults.  And,  inasmuch  as  it  redeemed  every  such  note 
on  demand,  with  the  precious  metals,  these  notes  would 
liave,  in  exchange,  the  same  value  as  the  precious  met- 
als, everywhere  in  the  immediate  vicinity  of  the  bank  ; 
and  they  might  have  the  same  value  in  other  places,  if 
this  bank  were  in  correspondence  with  other  banks  of 
the  same  character,  in  the  different  places  with  which 
its  customers  transacted  business. 


BiNKS    IN    THE    UNITED    ST\TES.  237 

Inasmuch  as  these  notes  possess  some  considerable 
adyaniages  over  specie  ;  that  is,  as  they  are  lighter,  oc- 
cupy less  bulk,  and  are  equal  in  exchangeable  value  to 
specie,  they  would  be  comi  jonly  preferred.  That  they 
are  so  preferred,  every  ouu  proves,  every  day,  by  his 
own  conduct.  When  we  take  a  check  to  the  bank,  and 
can  receive  for  it,  either  notes  of  the  bank  or  specie,  we 
rarely  take  the  specie,  except  in  such  quaniiiies  as  may 
be  required  for  small  exchanges.  Fronj  these  reasons 
it  is  manifest,  that  under  such  circumstances,  a  portion 
of  the  currency  in  a  country,  when  banks  were  estab- 
lished which  had  the  confidence  of  the  community,  would 
become  paper  instead  of  metal. 

Now,  banks,  in  this  country,  and  in  Great  Britain, 
generally  perform  all  three  of  these  functions.  They 
receive  and  pay  out  money  on  deposit,  and  keep  all  the 
accounts  necessary  to  these  transactions  ;  they  loan 
money  at  interest,  and  collect  money  so  loaned  ;  and 
they  also  issue  their  own  promissory  notes,  payable  in 
specie,  on  demand. 

We  shall  close  this  section,  by  a  brief  notice  of  the 
maimer  in  which  banks  are  created  .n  this  country,  and 
a  statement  of  their  sources  of  profit. 

Banks,  in  this  country,  are  commonly  chartered  in- 
corporations ;  that  is,  the  privilege  of  banking  is  con- 
ferred on  several  associated  individuals,  by  a  special  act 
of  legislation.  By  these  acts,  banking  companies  are 
entitled  to  certain  privileges,  are  subject  to  ceitain 
forms  of  legislative  inspection,  and  are  restricted,  in 
their  operations,  within  such  limits  as  the  wisdom  of  the 
legislature  ma^  see  fit  to  impose.  These  privileges  gen* 
erally  refer  either  to  the  mode  of  collecting  their  debts ; 
or  to  the  limit  of  the  liability  of  the  individuals,  m  case 
of  failure  ;  or  to  the  power  of  issuing  bills  on  demand. 
And  the  restrictions  limit  the  amount  of  their  circula- 
tion, in  proportion  to  their  actual  capital,  or  their  specie 
in  actual  possession. 

When  any  number  of  persons  desire  to  be  incorporat- 
ed as  a  banking  company,  they  present  a  petition  to  the 
Icgislatire  of  the  State  in  which  iliey  reside,  praying  for 


238  SECURITY    OF    BANKS. 

such  privilege.  If  ♦he  prayer  be  granted,  ihey  are  thus 
incorporated,  ana  th3  amount  of  their  capital  is  liniited 
in  the  act.  This  sum  is  divided  into  shares,  or  equal 
portions,  of  such  amount  as  may  be  supposed  best  suit- 
ed to  answer  the  wants  of  thj  community.  At  a  giver 
tune  and  place,  publicly  notified,  books  are  opened  for 
subscription  ;  that  is,  every  one  is  allowed  to  subscribe 
for  as  many  shares  as  he  wishes.  The  subscribers  are 
called  stockholders^  and  the  shares  are  commonly,  in 
mercantile  language,  called  stock.  When  the  necessary 
amount  has  been  subscribed  the  stockholders  meet,  and 
choose,  from  their  number,  certain  persons  to  conduct 
the  operations  of  the 'bank,  who  are  called  Directors. 
These  directors  then  choose,  from  their  own  number,  a 
President^  and  some  oerson,  not  of  their  number,  as 
Cashier.  On  these  two  last  mentioned  persons,  the  ac- 
tive duties  of  conducting  the  affairs  of  tne  bank  depend  ; 
though  the  directors  meet,  at  stated  times,  for  the  pur- 
poses of  general  consultation,  and  especially  to  decide 
upon  the  commercial  character  of  those,  to  whom  they 
are  requested  to  loan  their  money. 

The  bank  is  thus  organized.  The  subscribers  are 
now  required  to  pay  to  the  cashier  the  sums  which  they 
have  subscribed  for  ;  that  is,  that  portion  of  the  amount, 
which  each  has  agreed  to  invest  in  the  general  business 
of  the  bank.  Suppose  the  capital  were  one  hundred 
thousand  dollars,  and  each  share  were  one  hundred  dol- 
lars, there  would  then  be  one  thousand  shares,  and  might 
be  one  thousand  stockholders.  As  soon  as  each  one 
had  paid  the  portion  for  which  he  had  subscribed,  one 
hundred  thousand  dollars  would  be  collected  in  the  bank- 
ing house,  and  this  would  be  the  capital,  with  which  ihey 
would  b«»  prepared  to  commence  their  banking  opera 
tions. 

The  manner  in  which  these  operations  are  conducted, 
is  something  like  the  following  :  The  bank  loans  its  own 
bills,  payable  in  specie,  to  those  who  wish  to  borrow, 
and  receives  the  notes  of  individuals,  of  equal  amount, 
m  return,  and  charges  them  interest,  which  is  paid  in  ad- 
vance.    The  paytr3nt  of  these  notes  is  always  guarai> 


SECURITY    OF    BANKS.  239 

tied  by  some  other  person  or  pe/sons,  called  endorsers. 
The  ordinary  period  of  loan,  is  thirty  or  sixty  days  ;  at 
ihe  close  of  which  time,  the  notes  are  required  to  bf 
paid,  either  in  whole,  or  in  part,  at  the  discretion  of  iht 
directors.  Hence,  if  it  were  necessary,  the  whole  af- 
fairs of  the  bank  might  be  closed  ;  that  is,  all  its  bills 
might  be  called  in,  and  all  the  notes  it  has  received 
might  be  given  up,  and  the  bank  remain  as  it  was  whrn 
it  commenced,  with  the  addition  of  whatever  interest  it 
might  have  acquired,  in  thirty  or  sixty  days. 

Suppose,  now,  the  capital  of  the  bank  were  all  paid 
in,  in  specie,  and  that  it  issued  notes  only  to  the  precise 
amount  of  its  capital.  In  this  case,  there  would  be  a 
double  and  full  guarantee  for  the  payment  of  its  bills. 
The  first  guarantee  would  be  the  specie  in  its  vaults, 
equal  to  the  amount  of  all  its  bills  in  circulation  ;  that  is. 
for  every  bill  it  issued,  there  could  be  shown  an  amount 
of  silver  or  gold,  equal  to  what  it  had  promised  to  pay. 
The  second  guarantee  would  be,  the  notes  of  the  indi- 
viduals, of  substantial  responsibility,  for  an  amount  great- 
er than  all  the  bills  whicli  the  bank  has  issued,  by  the 
interest  which  was  deducted  from  the  note  when  it  was 
received.  Thus,  suppose  the  capital  of  the  bank  to  be 
one  hundred  thousand  dollars,  and  that  this  has  all  been 
paid  in  specie.  The  bank  loans  one  hundred  thousand 
dollars  of  its  bills,  and  receives  one  hundred  thousand 
dollars'  worth  of  the  notes  of  individuals  of  sound  pecu- 
niary ability.  The  bank  is  then  liable  to  pay  one  hun- 
dred thousand  dollars,  and  it  has,  wherewith  (o  |)ay  it, 
two  hundred  thousand  dollars  ;  that  is,  one  hundred  thou- 
sand dollars  in  specie,  and  one  hundred  thousand  dollars 
of  the  notes  of  individuals.  I  think  that  every  one 
would  be  inclined  to  say,  that  such  a  bank  was  not  only 
safe,  but  even  superfluously  safe.  If  all  the  debtors 
failed^  and  nothing  was  received  for  its  issues,  yet  its 
notes  would  be  safe  ;  for  it  would  still  have,  in  its  vaults, 
sufficient  to  meet  every  demand,  as  soon  as  presented, 
even  if  all  its  bills  were  presented  for  payment  at  the 
tame  instant. 

Now,   inasmuch  as  one   perfect   security  is  as  safe  as 


240  SECURITY    OF    BANKS. 

two,  and,  as  this  security  is  more  than  perfect,  it  mighi 
be  diminished, 'and  yet  the  bills  of  the  bank  be  perfectly 
safe.  Thus,  it  is  morally  certain,  that  all  the  bills  of  the 
bank  can  never  be  presented  for  payment  at  the  same 
instant.  If  this  can  never  be  the  case,  as  its  debtors 
are  continually  paying  back  what  they  have  borrowed, 
and,  as  it  has,  always,  as  much  less  to  redeen),  as  it  has 
already  redeemed,  it  is  manifest,  that,  with  something  less 
than  the  amount  of  specie  designated  by  its  notes,  it  may 
always  be  prepared  to  meet  every  demand  that  may  be 
made  upon  it.  Again  :  If  all  its  debtors  failed,  it  would 
still  have,  in  its  specie,  if  equal  to  its  bills  in  circulation, 
enough  to  redeem  all  its  issues.  But,  with  any  tolerable 
management,  its  debtors  would  not  all  fail.  It  would  be 
a  very  unusual  occurrence,  if  one  half  of  them  failed. 
The  bank  would  be  then  perfectly  secure,  If  the  propor- ' 
tion  of  its  specie  capital,  in  actual  possession,  were  suf- 
ficient to  pay  all  deficits  which  could  arise,  from  the  fail- 
ure of  its  debtors.  Hence,  we  see,  that  the  ultimate 
security  of  a  bank  would  always  be  perfect,  if  it  always 
possessed  enough,  in  specie  capital,  to  redeem  every 
bill  as  soon  as  it  was  presented,  and  also  sufficient  to 
guaranty  the  holder,  against  any  injury  which  it  might 
suffer,  from  the  failure  of  its  customers  ;  that  is,  if  there 
existed  this  ratio  between  the  issues  of  the  bank,  and 
the  capital  in  its  vaults,  such  a  bank  would  be  of  un- 
doubted security.  But  ultimate  security  is  not  all  that  is 
in  this  case  demanded.  The  bills  of  the  bank  must  not 
only  be  redeemed  at  some  time  or  other,  they  must  be 
redeemed  on  demand,  for  this  is  what  the  bank  promises. 
This  is  what  the  community  has  a  right  to  expect,  and 
this  is  essential  to  their  character  as  money.  Hence,  it 
must  always  maintain  its  ability  to  redeem  its  bills  in  the 
precious  metal,  whenever  they  may  be  presented. 

If  it  went  beyond  this  ratio,  and  just  in  proportion  as 
it  went  beyond  it,  there  would  be  danger  that  its  notes 
would  not  be  redeemed,  or  if  ultimately  redeemed  thai 
they  would  not  be  redeemed  on  demand  ;  hence,  that 
they  would  be  of  imperfect  value,  or  even  be  valueless, 
and   thus,   that   the  holders  of  them  would  lose,  to  the 


SOURCES  OF  PROFITS  OF  BANKS.       241 

full  amount  or  their  depreciation.  ThuS;  we  see,  in 
general,  if  the  capital  in  specie  were  equal  to  the  circu- 
lation, though  all  the  debtors  of  the  bank  failed,  the 
holders  of  its  bills  would  lose  nothing,  but  the  stock- 
holders would  lose  all  their  ct)ntributed  capital.  If  all 
the  specie  were  stolen,  and  the  notes  were  all  paid,  the 
holders  would  lose  nothing,  but  the  stockholders  would 
lose  all.  But  if  there  had  been  fraud,  at  the  commence- 
ment, and  no  capital  had  been  contributed,  if  the  debtors 
of  the  bank  all  failed,  the  holders  of  the  notes  would  lose 
all,  and  the  stockholders  would  lose  nothing.  And,  in 
general^,  if  the  debtors  of  the  bank  failed,  the  holders  of 
the  bills  could  lose  nothing,  unless  the  deficit  thus  creat- 
ed, were  more  than  sufficient  to  consume  all  the  actual 
capital  of  the  bank.  The  capital  of  the  bank,  is  the 
guarantee  for  the  payment  of  the  bills  which  the  bank 
has  issued  in  exchange  for  the  notes  of  individuals  ;  and 
hence  the  holders  of  these  bills  cannot  suffer  until  this 
capital,  and  the  proceeds  of  these  notes,  be  both  ex- 
hausted. 


OF  THE  SOURCES  OF  THE  PROFITS  OF  BANKS. 

1.  From  deposits.  As  banks  are  extensively  used 
tor  this  purpose,  they  must  have  on  hand,  at  all  times,  a 
considerable  amount,  from  this  source,  lying  idle.  This 
may  be  considered  a  part  of  their  capital,  which  they 
may  use  in  their  business.  If  a  bank  have,  on  an  aver- 
age, fifty  thousand  dollars  of  deposits,  it  may  loan  to  a 
considerable  amount  beyond  what  would  otherwise  be  in 
its  power,  because,  it  has  this  additional  amount  of  means 
wherewith  to  meet  the  demands  made  upon  it.  The 
first  source  of  profit,  is,  therefore,  interest  gained  on  de- 
posits. 

2.  From  exchanges.  As  these  are  to  be  made  be- 
tween different  places,  and  as  they  must  be  made  in 
drafts  or  in  specie  ;  if  two  banks,  in  different  places,  un- 
dertake to  transact  this  business  in  concert,  they  ma) 

21 


243  THE    UTILITY     OF    BANKS. 

greatly  facilitate  the  means  of  payment  between  two  pla 
ces.     For  lliis   accommodation,  they    charge  a  perren 
lage,  varying  witii  the  rate  of   the  market.      This  is  an- 
other source  of  revenue. 

3.  From   interest  on  notes   discounted  ;  that  is,    on 
its  regular  loans.     This  is  its  great  source  of  revenue. 

The  manner  of  this  has  been  already  explained. 

4.  As,  from  what  has  been  said,  it  is  evident  that  a 
bank  may  safely  loan  an  amount  of  its  notes,  greater  than 
that  of  its  capital,  the  interest  of  this  excess,  is  an  addi- 
tional source  of  revenue.  Thus,  if  a  bank  have  0!;e 
hundred  thousand  dollars  paid  in,  and  issue  notes  to  l\ui 
amount  of  one  hundred  and  twenty-five  thousand  dollars, 
it  receives  interest  on  twenty-five  thousand  dollars  more 
than  its  stockholders  have  deposited.  This  is  .an  addi 
lion  to  its  revenue,  by  its  amount,  whatever  it  may  be. 


SECTION  II. 

THE    UTILITY    OF    BANKS. 

In  stating  the  nature  of  banks,  in  the  preceding  sec- 
tion, we  have,  to  a  considerable  extent,  unfolded  the 
principles  on  which  their  utility  depends.  The  subject 
is,  however,  susceptible  of  a  more  ample  development. 
We  shall,  therefore,  pursue  it  through  the  present  section. 

We  have  shown  that  the  functions  of  banks  were  of 
three  kinds  :  First,  As  institutions  of  deposit ;  Secondly^ 
As  institutions  of  discount  or  loan  ;  and.  Third,  As  in- 
stitutions of  circulation.  We  shall  proceed  to  consider 
their  utility,  in  each  of  these  three  respects. 

I.    The  utility  of  banks  as  institutions  of  deposit. 

The  utility  of  banks,  in  this  respect,  is  derived  from 
the  saving  of  labor  and  capital.  They  save  the  labor 
of  transportation,  of  counting,  and  of  vigilance.  They 
save  capital,  by  enabling  the  same  capital  to  accomplish 
a  greater  amoun*.  of  exchanges.     Of  the  manner  in  which 


UTILITY    OF    BANKS    OF    DEPOSIT.  243 

this  is  done,  I  do  not  know  that  any  thing  fur  .her  neeo 
be  said.  In  so  far  as  this  is  concerned,  all  that  is  ne- 
cessary to  be  done,  is,  so  to  conduct  their  arrangements 
as  to  increase  their  utility  in  the  greatest  possible  degree. 

In  so  far  as  a  bank  is  intended  for  a  place  of  deposit 
for  the  circulating  medium  of  any  particular  community, 
the  arrangements  which  need  be  attended  to  will  at  once 
suggest  themselves.  For  instance,  its  location  should 
be  such,  as  to  accommodate  the  greatest  number  of  its 
customers.  Its  hours  of  business  should  be  the  same 
as  those  of  the  mercantile  conmiunity.  Its  affairs  should 
be  conducted  with  the  greatest  possible  regularity.  Mis- 
takes frequently  produce  the  same  effect  as  fraud,  and 
they  always  present,  either  to  the  one  party  or  the  other, 
a  great  temptation  to  it.  The  physical  and  moral  secu- 
rity of  the  institution,  should  be  as  great  as  possible. 
Hence,  a  banking-house  should  possess  every  practica- 
ble security  against  fire  and  robbery  ;  and,  if  necessary, 
should  be  always  under  the  protection  of  a  gi.ard.  Such 
IS  the  case  with  the  Bank  of  England.  The  officers  of 
the  bank,  whether  chief  or  subordinate,  should  be  per- 
sons of  tried  integrity,  and  should  also  be  so  arranged,  in 
respect  to  each  other,  that  collusion  should,  if  possible, 
be  impracticable  ;  and  their  whole  affairs  should  be  so 
under  the  inspection  of  those,  whose  interest  it  is  to  de- 
tect any  fraud,  that  dishonesty  might  be  as  difficult  as  pos- 
sible. The  chief  officers  should  be  men  of  property, 
so  that  their  own  interests  would  suffer  more  than  they 
could  gain,  by  any  violation  of  faith. 

The  necessity  of  all  these  provisions  will  be  at  once 
apparent.  It  is  for  the  interests  of  the  community,  as 
well  as  of  the  bank,  that  every  one  should  transact  his 
business  by  means  of  a  bank  ;  that  is,  that  he  should  re- 
ceive and  pay  money  through  means  of  its  agency.  Hut, 
no  one  will  employ  this  agency,  unless  he  is  certain  thai 
his  money  will  be  appropriated  as  he  directs,  and  that 
nothing  shall  be  lost,  either  by  carelessness  or  by  dis* 
honesty. 

But  hanks,  as  institutions  of  deposit,  are  designed  also 
to  facilitate  the  payments  of  money  in  different  placet. 


344  UTILITY     OP    BANKS     OF    DEPOSIT. 

Thus,  if  two  banks,  the  one  in  BostOH  and  the  other 
in  New  York,  had  perfect  confidence  in  each  other's  re- 
sources, by  drawing  upon  each  other  they  might  be  of 
great  service  to  the  commercial  conummity.  In  such  a 
case,  the  Boston  merchant  who  wished  to  pay  a  debt  in 
New  York  might  pay  his  money  to  the  bank  in  Boston, 
and  send  by  mail  the  draft  of  that  bank  in  payment  of  hig 
debt.  This  draft  would  be  paid  at  sight  by  the  bank  in 
New  York,  and  thus  the  debt  would  be  cancelled.  A 
merchant  in  New  York  having  money  to  pay  in  Bos- 
ton, would  take  the  same  course,  and  thus  the  one  draft 
would  pay  for  the  other.  The  same  result  would  be  ac- 
complished if  the  bank  at  either  place  purchased  drafts 
on  individuals  known  to  be  solvent,  and  sent  them  to  the 
bank  in  the  other  city  for  collection.  By  charging  a 
slight  percentage  for  the  labor  and  risk,  in  addition  to 
the  regular  rate  of  exchange,  as  it  might  happen  to  exist 
between  the  two  places,  the  banks  would  earn  a  hand 
some  profit  and  at  the  same  time  accommodate  their  cus- 
tomers. And  still  further,  if  two  banks  were  well  ac- 
quainted with  the  resources  of  each  other,  and  were 
each  confident  that  all  the  debts  of  the  other  would  be 
paid,  they  might  give  orders  on  each  other,  for  the  facil- 
itating of  exchange.  Thus  if  A  wished  to  pay  money  in 
New  York,  and  a  bank  in  Boston  were  authorized  to 
draw  on  New  York,  it  might  furnish  him  with  a  draft 
which  would  be  paid  in  New  York,  and  receive  the  dif- 
ference of  exchange  ;  and  the  same  operation  being  per- 
formed by  the  bank  in  New  York,  each  would  receive, 
at  every  transaction,  a  moderate  percentage,  and  yet 
add  greatly  to  the  convenience  of  the  community. 

On  this  account,  I  suppose  it  would  be  much  better, 
to  have  several  banks  nearly  connected,  as  the  branches 
of  a  large  bank,  than  to  have  them  isolated,  and  inde- 
[»endent  of  each  other.  When  banks  are,  in  some  meas- 
ure, responsible  for  each  other,  they  must  become  ac- 
quainted with  the  standing  of  each  other,  and  will,  of 
course,  be  disposed  to  check  each  other's  excessive 
transactions.  Hence,  they  will, also  be  more  likely  to 
^ive  to  each  other  everv  reasonable  credit.     When,  od 


UTILITY    OF     BANKS     OF     DISCOUNT.  245 

i.be  contrary,  each  one  is  entirely  isolated  from  all  the 
rest,  and  no  one  bank  eitlier  knows,  or  has  a  right  to 
know  the  condition  of  the  other  ;  each  is  naturally  fear- 
ful of  the  solvency  of  the  rest  ;  and  thus,  may  not  be 
willing  to  afford  those  facilities  of  exchange,  whicti  the 
transactions  of  commerce  require.  Hence,  the  price  of 
exchange  is  liable  to  rise  unnecessarily  high  ;  and,  of 
course,  an  unnecessary  expense  is  imposed  upon  the 
trading  community.  It  is  by  means  of  its  system  of 
branches,  and  the  supervision  which  it  thus  exerted  over 
them,  that  the  late  United  States  Bank  was  enabled  to 
carry  on,  so  extensively,  the  business  of  exchange,  wiih 
great  profit  to  itself,  and  with  great  benefit  to  the  com- 
munity. Were  links,  in  general,  constructed  more 
upon  this  plan,  I  think  it  would  greatly  facilitate  the 
business  of  exchange. 

While,  however,  it.  is  granted  that  banks  thus  associat- 
ed possess  great  facilities  for  conducting  the  exchanges 
which  must  be  effected  between  different  parts  of  the 
same  country,  it  is  not  to  be  denied  that  objections  may 
be  urged  against  entrusting  them  with  this  agency.  In- 
asmuch as  so  powerful  a  combination  would  have  the 
power  of  rendering  money  plenty  or  scarce  at  any  partic- 
ular time  and  place,  they  have  it  in  their  power  to  render 
the  rate  of  exchange  jiigh  or  low  at  their  will.  Hence, 
they  might  monopolize  the  whole  business  of  exchange, 
and  regulate  it  almost  at  their  pleasure.  Were  such  an 
associated  banking  power  organized,  this,  therefore,  is 
one  of  the  evils  which  should  be  guarded  against.  Se*^ 
Raguet  on  Money  and  Banking,  Book  2d,  Chap.  10. 

II.    The  advantages  of  banks^  as  institutions  0/  di* 

COUNT  AND    LOAN. 

1 .  It  may  be  proper  to  suggest,  at  the  beginning  of 
uur  remarks  on  this  head,  that  banks  add  nothing  to  tho 
capital  of  a  country.  Capital  has  been  already  defined. 
It  is  cither  the  material  on  which  industry  operates,  tho 
instruments  with  which  it  operates,  or  the  means  of  sus- 
tentation  by  which  it  is  supported  durmg  the  operation. 
The  capital  of  any  country,  at  any  one  moment,  con- 
sists of  the  amount  of  these  which  it  then  possesses. 
21* 


346  UTILITY    OF    BANKS     JF    DISCOUNT. 

Now,  it  is  evident,  that  the  collecting  of  this  in  on<? 
place,  rather  than  in  anQther  ;  the  loaning  of  it  to  one, 
rather  than  to  another ;  or  the  loaning  of  it,  instead  of 
not  loaning  it  at  all  ;  or  the  manufacture  of  printed  or 
of  written  promises  to  pay  money  or  any  thing  else  ;  can 
never  increase  the  capital,  that  is,  the  wealth,  or  the 
amount  of  objects  of  desire,  possessed  by  any  country. 
A  man  is  surely  no  richer,  because  he  verbally  piomises 
to  pay  me  one  hundred  dollars  ;  nor  am  I  any  the  richer 
for  his  promise.  And,  if  neither  he  nor  I  be  the  richer, 
I  see  not  who  else  can  be  the  richer  for  it.  And,  if  ho 
actually  lend  me  one  hundred  dollars,  and  I  return  it  at 
the  end  of  the  week,  if  I  have  used  it  profitably,  the 
capital  of  the  country  has  taken  a  different  direction 
from  that  which  it  would  have  taken  ;  that  is,  it  has  been 
in  my  hands  instead  of  being  in  the  hands  of  some  one 
else,  but  this  is  all.  The  capital  is  the  same,  except 
that  my  industry  may  have  added  somewhat  to  it. 
Could  a  nation,  or  an  individual,  become  rich  by  the 
issue  of  promissory  notes,  ho  one,  who  could  write  a 
promissory  note,  ever  need  be  poor.  But  it  is  manifest 
that  this  is  not  one  of  the  methods  by  which  the  capital 
is,  in  our  present  state,  to  be  increased.  This  subject 
is  so  obvious,  that  it  seems  really  almost  unworthy  of 
serious  consideration.  The  above  remarks,  however, 
have  been  made,  because  the  contrary  notion  has  been 
so  frequently  maintained,  and  even  so  frequently  acted 
upon,  to  the  great  detriment  of  the  commercial  interests 
of  the  community.  No  one,  who  has  the  least  practical 
acquaintance  with  the  functions  of  capital  and  of  money, 
can  candidly  reflect  upon  the  subject  for  a  moment, 
without  coming  to  a  correct  conclusion. 

2.  But  whilst  it  is  allowed  that  banks  add  nothing  to 
(lie  3xisting  capital  of  a  country,  it  is  also  true,  that  they 
are  capable  of  rendering  the  existing  capital  much  more 
productive.  In  this  manner,  the  practical  result  may,  to 
some  extent,  be  the  same  as  though  they  actually  in- 
creased the  capital  of  a  country.  If  one  million  of 
capital  be  capable,  under  ordinary  circumstances,  of 
producing  t"  o  hundred  thousand  dollars  of  annual  reV' 


NATURE    OF    CREDIT.  247 

enue  ;  and  if,  by  means  of  any  improvement  in  the  man- 
ner of  its  distribution,  it  can  be  made  to  produce  three 
hundred  thousand  dollars,  the  annual  result  is  the  same  as 
if,  under  the  previous  circumstances,  the  capital  had  beet 
increased  to  a  million  and  a  half.  And,  it  is  because 
banks  have  frequently  thus  increased  the  produciivenesj 
of  capital,  that  the  notion  has  arisen,  that  they  increasfl 
the  capital  of  a  country  itself. 

The  manner  in  which  banks  may  increase  the  pro- 
ductiveness of  capital,  will  then  be  the  subject  for  our 
present  consideration. 

Banks  increase  the  productiveness  of  capital,  chiefly, 
by  the  facilities  which  they  afford  for  the  extension  of 
credit.  The  nature  of  credit  is,  however,  fust  to  be 
considered. 

"  Credit  is  the  term  used  to  express  the  trust  or  con- 
fidence placed  by  one  individual  in  another,  when  he  as- 
signs him  money  or  other  property  in  loan,  or  without 
stipulating  for  its  immediate  payment.  The  party  who 
lends.,  is  said  to  give  credit,  and  the  party  who  borrowsy 
to  obtain  credit."  * 

Banks  increase  the  facility  with  which  those  who  wish 
to  lend  can  lend,  and  those  who  wish  to  borrow  can  bor- 
row. 

That  the  extension  of  credit,  in  every  manner  which 
can  be  rendered  consistent  with  the  safety  of  the  lender, 
must  increase  the  productiveness  of  capital,  may  be  seen 
from  the  following  considerations  : 

I .  It  is  manifest,  that  the  labor  of  man,  without  tools, 
must  be,  in  the  smallest  degree,  productive.  What  man, 
by  the  mere  labor  of  his  Aanrfs,  without  tools,  could 
ever  maintain  a  family,  or  even  maintain  himself.''  With- 
out an  axe,  he  could  neither  cut  nor  cleave  wood  ;  with- 
out a  hod,  he  could  not  even  carry  mortar.  He  could 
add  but  very  little  to  productiveness,  and  hence,  his  rev- 
enue must  be  reduced  to  the  lowest  hmit.  But  give 
him  tools  ;  that  is,  capital  ;  and  the  productiveness  of 
his  labor  is  at  once  greatly  increased.     As  he  receives 

•  McCulloch. 


248  UTILITY    OF    CREDIT. 

an  equitable  share  of  this  productiveness,  his  weahh  h 
also  increased.  Thus,  by  the  use  of  a  small  portion  of 
capital,  both  he,  and  the  community  ;  that  is,  every  in 
dividual,  are  rendered  richer. 

2.  But  this  is  not  all.  A  man  may  have  skill  and 
instruments,  but  he  may  not  have  the  material,  on  which 
to  exert  his  industry.  In  this  case,  his  industry  and  in- 
struments will  be  useless.  Thus,  a  cabinet-maker  may 
possess  both  skill  and  tools,  but  if  he  have  no  mahogany 
upon  which  to  labor,  all  his  skill  will  be  of  no  value. 
If  he  can  procure  materials,  he  can,  by  a  week's  labor, 
add  very  considerably  to  the  total  wealth,  both  of  the 
community  and  of  himself  A  blacksmith  may  have 
skill  and  tools,  but  if  he  can  procure  neither  iron  nor 
coal,  his  skill  and  tools  arc  valueless.  Let  him  possess 
iron  and  coal,  and  his  industry  and  skill  will  not  only 
support  him,  but  render  the  annual  revenue  of  the  socie- 
ty much  greater.  A  merchant  may  have  skill  in  the 
business  of  exchange,  which  might  be  a  great  saving  to 
a  whole  neighborhood,  but  if  he  have  no  means  of  pro- 
curing a  stock  of  goods  with  which  to  commence  ex- 
changes, his  skill  will  add  nothing  to  the  wealth  of  the 
community.  Thus,  in  order  for  the  industry  and  skill 
of  the  community  to  operate  most  productively,  it  must 
be  as  universally  as  possible  united  with  capital. 

But,  it  may  be  said,  let  all  these  operatives  labor  in 
the  employment  of  those  who  possess  capital,  until  they 
have  acquired  sufficient  to  commence  production  on  their 
own  account.  This,  to  a  considerable  extent,  is  al- 
ways done  ;  and,  by  this  means,  the  productiveness  of 
a  country  is  annually  increased.  It  may  be  proper, 
however,  to  show  in  what  manner,  by  a  different  arrange- 
ment, and  a  wider  dissemination  of  the  benefits  of  capi* 
lal,  productiveness  may  be  more  rapidly  increased. 

I.   Jls  to  Capitalists. 

1.  Were  this  plan  universally  adopted,  it  would  oblige 
capitalists  either  to  extend  their  business  beyond  their 
wishes,  or  else  to  leave  many  laborers  unemployed.  If 
a  capitalist  loaned  nothing,  he  must  invest  all  his  annual 
revenue  in  the  business  of  his  own  profession.     Were 


UTILITY    OF    CREDIT.  249 

he  successful,  in  this  manner,  lie  would,  in  ihe  course  of 
years,  be  obliged  so  to  enlarge  all  his  means  of  produc- 
tion, that  a  great  part  of-  his  afl'airs  must  be  managed  by 
subordinate  agents. 

2.  The  talent  for  conducting  large  transactions,  is  by 
no  means  universally  possessed.  Many  men,  who  are 
capable  of  superintending  an  establishment  of  ten  thou 
Band  dollars  per  year,  would  be  utterly  incapable  of  con- 
ducting one,  of  one  hundred  thousand  dollars  per  year. 
And,  in  general,  in  proportion  to  the  number  of  grades 
of  agency  necessary  to  the  management  of  any  concejn, 
the  ratio  of  profit  diminishes. 

3,  Suppose  capitalists  always  to  employ  their  own 
capital,  the  burden  of  every  man's  business  would  in- 
crease with  his  years  ;  and  thus,  the  older  he  grew,  and, 
of  course,  the  more  unfit  for  business,  the  more  intoler- 
able would  the  pressure  of  business  become.  This  is 
unnatural.  As  a  man  advances  in  years,  and  is  less 
adapted  to  labor,  he  is  disposed  to  retire  from  it,  and  to 
seek  for  some  metho.d  in  which,  without  active  employ- 
ment, he  may  reap  the  advantage  of  his  previous  indus- 
try and  frugality. 

II.  tSs  to.  Laborers. 

1.  A  laborer  will  work  with  skill  and  success,  just  in 
proportion  to  the  personal  advantage  which  he  reaps  from 
his  own  labor.  Now,  every  one  must  perceive,  that 
these  inducements  will  operate  with  more  success,  when 
he  is  laboring  upon  his  own  capital,  and  reaping  all  the 
advantages  of  his  skill,  than  when  he  is  laboring  upon 
the  capital  of  another,  and  is  paid  only  at  a  stipulated 
price.  A  hundred  men,  each  possessing  a  capital  of 
iwo  hundred  dollars,  allowing  each  one  to  select  his  own 
[•lace  for  labor,  would  add  much  more  to  the  annual 
revenue  of  a  country,  than  one  hundred  men,  al  labor- 
ing in  the  same  place,  under  an  employer,  who  himself 
owned  the  whole  twenty  thousand  dollars. 

2.  Besides,  were  capital  thus  to  accumulate,  in  a  few 
hands,  it  would  confine  the  operations  of  industry  to  a 
few  places,  and  thus  materially  add  to  il>e  cost  of  pro- 
du(  tion,  and  diminish  the  conveniences  of  the  comma- 


250  UTILITY    OF    CREDIT. 

nity  Many  of  the  trades  require  to  be  conducted  ver) 
near  the  residence  of  the  consumer.  The  blacksmith, 
the  carpenter,  the  cabinet-maker,  the  shoe-maker,  the 
baker,  and  the  retail  merchant,  must  reside  in  the  midst 
of  the  community  for  whom  they  labor.  Were  capital 
always  to  be  employed  by  those  who  own  it,  it  would, 
of  necessity,  be  collected  into  large  masses,  and  the 
consumer  would  lose  a  great  deal  of  time  in  procuring 
the  product  which  he  needed.  The  farmer  would  bo 
obliged  to  go  to  the  city  to  have  his  horse  shod  or  his 
plough  mended,  and  thus,  the  labor  of  transportation, 
and  the  consumption  of  time,  would  be  greatly  increased. 
And  it  must  be  moreover  evident,  that  inasmuch  as  the 
extension  of  credit  tends  to  afford  special  advantages  to 
the  laboring  classes,  it  is  peculiarly  adapted  to  the  gen- 
ius of  a  republican  government. 

From  these  reasons,  I  think  it  evident  that  the  pro- 
ductiveness of  a  country  must  be  greatly  increased,  by 
any  means  which  shall  enable  the  skilful  and  industrious, 
in  any  profession,  to  obtain  the  use  of  capital,  by  means 
of  which  they  may  labor  on  their  own  account,  and,  in 
any  place  which  presents  the  strongest  inducements  of 
personal  interest.  They  will  thus  produce  more  abun- 
dantly, and  enrich  more  rapidly,  the  country,  as  well  as 
themselves.  And,  if  such  arrangements  can  also  be 
made,  that  those  who  loan  them  the  capital  shall  be  per- 
fectly secure,  it  will  be  a  mutual  advantage  to  the  capi 
talist  and  to  the  laborer.  While  the  laborer  is  improving 
his  condition,  the  capitalist  is  also  enjoying,  in  security, 
the  benefit  of  his  former  industry  ;  and  thus,  without  la* 
boring  himself,  is  enjoying  all  the  advantages  of  labor. 
And,  I  believe,  that  arrangements,  of  this  kind  are  com- 
monly found  to  be  more  advantageous  to  a  capitalist, 
than  a  continuance  in  active  business.  The  general 
opinion  of  mercantile  men,  is,  T  think,  that  merchants  in 
declining  years,  are  more  likely  to  lose,  than  to  gain,  by 
continuing  in  business  beyond  the  period  of  active  en- 
terpi'se.  The  last  ten  years  of  a  life,  have  frequently 
been  destructive  of  the  results  of  all  the  labors  of  the 
forty  previous  years. 


UTILITY    OF    BANKS    OF    DISCOUNT.  25r. 

The  same  principles  apply  to  all  persons  employed  m 
'abor  or  trade.  And  hence  we  see,  in  general,  that  it  is 
oy  means  of  credit,  that  those  who  possess  more  capital 
than  they  wish  personally  to  employ,  may,  without  labor, 
derive  from  it  an  equitable  revenue  ;  and  tnat  those  who 
have  less  capital  than  they  can  profitably  employ,  n)ay 
procure  tlie  use  of  such  capital  as  they  wish,  and  may 
thus  be  enabled  to  enjoy  the  full  benefit  of  their  skill  and 
mdustry.  It  is  thus  that  a  poor  man,  with  industry  and 
skill,  is  enabled,  at  once,  to  reap  all  the  advantages  of 
riches  ;  and  a  rich  man,  whose  power  of  labor  is  past, 
to  reap,  to  a  considerable  degree,  the  advantages  of  in- 
dustry and  skill.  The  benefit,  to  both  parties,  is  great 
and  mutual.  And,  it  is  manifest,  that  any  institution, 
which  contributes  to  accomplish  such  a  result,  must  be 
of  material  service  to  the  community. 

Now,  banks  are  such  institutions.  They  stand  m  an 
intermediate  place,  between  capitalists  and  laborers  ;  and 
enable  both  to  derive  advantage  from  each  other. 

They  do  this,  in  the  following  ways  : 

I.  They  collect  together  capital,  which  would,  other- 
wise, be  scattered  and  useless. 

1.  This  has  been  in  part  illustrated  before.  The 
greater  the  difficulties  of  loaning,  the  less  will  always  be 
the  amount  loaned.  If  he  who  has  a  few  hundred  dol- 
lars to  loan,  is  obliged  to  wait  until  some  one  calls  for  it, 
it  will  lie  for  the  greater  part  of  the  lime  idle.  And  if 
he  be  obliged  to  observe  the  circumstances  of  a  debtor, 
of  whom  he  may  know  very  little,  the  time  and  labor 
thus  spent  will  frequently  be  as  valuable  as  the  interest 
he  is  to  receive.  Hence,  a  large  amount  of  capital  will 
always  remain  unproductive  ;  and,  consequently,  a  large 
amount  of  industry,  which  might  have  been  rendered 
productive  by  means  of  it,  will  languish. 

2.  But  this  is  not  all.  A  large  amount  of  capital  is 
always  in  the  possession  of  widows,  minors,  and  aged 
persons,  who  are  unable  to  unite  with  it,  that  labor  which 
is  necessary  for  its  productiveness.  These  persons  can 
neither  labor  with  it  themselves,  nor  are  they  capable  of 
superintending  the  loaning  of  it,  either  safely  or  profita- 


252  UTILITY    OF    BANKS    OF    DISCOUNT 

bly.  Hence,  the  fear  of  losing  all  will  deter  ihem  from 
loaning,  and  they  will  hoard  it,  and  live  upon  the  princi- 
pal, until  it  is  all  spent,  and  they  are  reduced  to  poverty. 
Thus,  the  property  which  might  have  been  useful  to 
others,  and  might  have  supported  themselves  without  any 
diminution  of  its  amount,  is  in  a  kw  years  dissipated  ; 
and  the  gains  of  a  previous  life,  instead  of  being  added 
£0  the  capital  of  a  succeeding  generation,  are  abstracted 
from  It  forever. 

'  3.  There  is  always  in  every  community,  a  large  num- 
ber of  persons  engaged  in  active  industry,  whose  gains 
cannot  at  present,  and  sometimes  cannot  at  all  be  invest- 
ed in  their  employment.  Such  are  laborers,  whose  gains 
cannot  be  of  service  to  them,  until  they  have  accumu- 
lated a  considerable  sum.  A  laboring  farmer  who  saves 
from  fifty  to  one  hundred  dollars  a  year,  cannot  with  this 
buy  a  farm,  until  he  have  accumulated  the  earnings  of 
several  years.  If  he  can  invest  these  gains  as  they  ac- 
crue, and  receive  interest  for  them,  they  will  annually 
add  to  his  stock.  If  he  cannot  thus  invest  them,  they 
niust  lie  idle,  doing  good  neither  to  himself  nor  to  any 
one  else.  The  same  is  the  case  with  mechanics,  and 
various  other  laborers. 

Besides  these,  there  is  a  very  large  class  of  the  com- 
munity whose  means  of  accumulation  cannot  be  increased 
by  the  addition  of  capital.  The  merchant  can,  by  in- 
vesting his  annual  gains  in  his  stock  in  trade,  increase 
his  sales,  and,  of  course,  his  profits.  But  how  can  the 
physician,  or  the  lawyer,  or  the  clergyman,  or  any  per- 
son who  is  paid  by  salary  do  this  ?  Hence,  if  there  be 
not  some  means  by  which  these  annual  gains  can  be  con- 
veniently collected  and  invested,  they  will  be  either  fool- 
ishly squandered  as  fast  as  they  arise,  or  they  will  be 
hoarded  without  any  annual  profit,  either  to  their  owner 
or  to  the  community. 

For  these  evils,  a  bank  provides  the  remedy.  The 
stock  of  a  bank  is  all  divided  into  shares,  of  such  amounts 
that  they  are  within  the  purchase  of  most  persons  who 
may  wish  to  invest  their  capital.  These  shares  are  al- 
ways for  sale,  at  a  price  regulated  by  the  interest  which 


UTILITY    OF    BANKS     OF    BfSCOUNT.  253 

they  annually  pay.  He  who  has  one  hundred  dollars  to 
invest,  purchases  one  hundred  dollars'  worth  of  bank 
stock.  He  receives  interest  on  this  one  hundred  dollar-:, 
from  the  day  he  purchases  it,  until  the  day  on  wlml) 
he  sells  it  again.  When  he  has  accumulated  any  thing 
more,  he  purchases  in  like  manner.  And  thus  he  has 
a  safe  place  of  investment  for  all  his  gains,  where  they 
are  both  held  securely  and  without  any  trouble  to  him, 
and  where  they  also  pay  him  an  annual  revenue.  When 
he  wishes  to  withdraw  these  funds,  and  to  appropriate 
them  to  some  other  use,  he  sells  his  stock  ;  that  is,  some 
one  becomes  one  of  the  stockholders  instead  of  him- 
self; and  he  thus  receives  back  the  money  which  he 
formerly  paid  in  These  shares  are  every  day  to  be 
bought  and  sold  u.  the  market ;  and  hence,  he  can  gen- 
erally invest  or  Withdi^w  his  money,  any  day  in  the  year 
at  an  hour's  warning. 

On  this  account,  it  will  at  once  be  evident,  that  the 
shares  of  banks  should  be  of  such  amount  as  will  best 
accommodate  the  communities  for  whose  benefit  they 
are  specially  designed.  When  they  are  intended  for 
capitalists,  they  may  as  well  be  large  as  small.  But 
when  they  are  for  the  benefit  of  those  who  have  but 
small  amounts  to  invest  at  one  time,  they  should  be 
small.  They  will,  in  this  manner,  enable  persons  of 
small  means,  the  more  easily  to  invest ;  and,  on  account 
of  this  increased  convenience,  as  their  stock  will  be 
more  eagerly  sought  for,  it  will  bear  a  higher  price  in 
the  market. 

The  utility  of  banks  would  be  still  further  increased, 
if,  besides  this  mode  of  investment,  they  were  in  the 
habit  of  receiving  small  deposits  on  interest,  which 
might  remain  with  them,  to  be  drawn  for  at  the  pleasure 
of  the  owner.  Many  persons,  having  small  amounts  of 
property  to  invest,  are  unacquainted  with  the  process 
of  buying  and  selling  bank  shares,  and  thus,  either 
spend  their  money  thoughtlessly,  or  allow  it  to  lie  idle. 
Were  hanks  to  receive  all  such  sums  on  deposit,  and 
allow  for  them  a  lower  interest  than  they  charge  tiieir 
customers,  they  might  thus  conduct  a  profitable  business 
22 


254  UTILITY    OF    BANKS     OF    DISCOUNT. 

as  tlie  loaners  of  money  for  tlie  public,  and  redeem  ^ 
large  amount  of  capital  from  unproductiveness.  This 
is  ihe  practice  of  the  banks  in  Scotland. 

It  is  true,  that  this  is  accomplished,  to  a  considerable 
degree,  by  savings  banks.  But  these  might  still  he  very 
usef  j1  by  receiving  money  in  smaller  sums  than  those  re- 
ceived by  the  bank,  and  it  might  remain  with  them,  until 
it  became  large  enough  to  invest  in  a  bank  of  discount. 
Thus  both  institutions  might  assist  each  other  ;  and  the 
l)ank  of  discount  would  have  this  additional  advantage, 
that  it  could  allow  of  the  withdrawal  of  money  on  de 
mand,  which  a  savings  bank  cannot  always  readily  do. 

In  this  manner,  banks  collect  together  the  scattered 
and  useless  portions  of  capital,  and  place  it  in  a  form  in 
which  it  may  be  conveniently  used  ;  and  they  also  col- 
lect together  that  which  would,  perhaps,  be  used,  but 
which,  without  their  assistance,  would  be  used  in  a  much 
less  convenient  manner,  both  to  the  borrower  and  the 
lender. 

II.  Let  us  now  see  in  what  manner,  after  this  capital 
has  been  thus  collected,  banks  enable  the  industrious 
classes  to  enjoy  the  benefit  of  it. 

The  most  obvious  method  in  which,  without  bar^ks, 
the  capitalist  would  assist  the  laborer,  would  be  to  sell 
nim  goods  on  credit.  Thus,  suppose  a  mechanic  v/ished 
io  establish  himself  in  a  village  where  his  services  would 
command  a  high  remuneration  ;  he  might  purchase  of 
the  dealer  in  the  material  which  he  wanted,  as  much 
stock  as  he  wished,  at  three  or  six  months,  or  a  yern's 
credit ;  and,  with  this  capital,  he  could  commence  iiis 
business.  By  converting  this  material  into  product,  and 
selling  it,  he  would  be  able  to  liquidate  the  debt ;  and  all 
the  surplus  would  be  his  own.  Or,  take  the  case  of  a 
wholesale  merchant.  Suppose  such  a  merchant  to  im- 
port into  a  large  city,  two  hundred  thousand  dollais 
worth  of  goods.  If  he  shall  wait  for  the  individual, 
who  may  need  his  wares,  to  come  and  purchase  them 
it  may  be  a  year  or  two  before  his  sales  are  completed 
There  may,  however,  be  fifty  retail  merchants,  of  small 
capital,  in  the   surrounding  towns,  who  are  not  able  to 


UTILITY    OF    BANKS     OF    DISCOUNT.  255 

pay  in  cash  for  his  commodities,  but  who,  if  they  can 
obtain  them  on  credit,  will  be  able,  both  to  sell  them  to 
good  advantage  to  themselves,  and  also  to  refund  the 
money  in  three  or  six  months.  It  will  be  of  advantage 
to  both  parties,  the  one  to  sell,  and  the  other  to  buy  on 
cjedit.  And  this  is  the  manner  in  which  very  much  of 
this  business  is  commonly  transacted. 

The  natural  limit  to  this  accommodation  is,  however, 
ihe  pecuniary  ability  of  the  merchant.  Were  there  no 
means  of  borrowing,  he  could  grant  but  httle  facility  in 
this  manner.  Just  in  proportion  as  he  were  enabled  to 
use  the  capital  of  others,  could  he  grant  the  use  of  cap- 
ital to  those,  whose  only  possession  was  their  labor  and 
skill.  Thus,  goods  could  be  purchased  to  but  a  small 
amount  on  credit,  were  not  the  wholesale  merchant  able 
to  avail  himself  of  the  capital,  which,  from  the  various 
sources  that  we  have  mentioned,  is  accumulated  in  banks. 
Under  these  circumstances,  in  times  of  ordinary  caution, 
there  would  be  a  large  class  of  industrious  men  whose 
enterprise  would  be  greatly  crippled  from  the  want  of 
capital. 

But  again,  suppose  that  a  retail  merchant  or  mechanic 
can  purchase  on  credit,  it  is  frequently  better  for  him  to 
borrow  of  a  bank  in  his  own  neighborhood,  than  to  pur- 
chase on  credit  at  a  distance  from  home. 

1.  If  his  character  be  good,  the  bank,  in  the  neigh- 
borhood where  he  is  known,  will  lend  to  him  at  a  lower 
rate  than  the  merchant  in  the  city  where  he  is  not  known. 
1  speak  of  the  merchant's  lending  to  him,  because,  to 
furnish  him  capital  on  credit,  is  to  lend  to  him  that 
amount  of  capital.  The  merchant  always  so  considers  it, 
and  hence  he  always  has  his  cash  and  his  credit  prices. 

2.  To  borrow  in  this  manner  is  clearly  of  advantage 
to  the  town  in  which  he  resides.  He  in  this  manner 
brings  into  profitable  use  capital  which  would  otherwise 
iiave  been  idle ;  and  the  very  manner  in  which  he  uses 
it  enables  him  to  sell  at  a  cheaper  rate  to  those  of  whom 
he  has  borrowed  it. 

It  Is  in  this  manner,  therefore,  that  banks  quicken  the 
iiidusfv  of  a  people.     They  first  collect  together,  and 


256  UTILITY    OF    BANKS     OF    DISCOUNT. 

render  available,  all  the  capital  of  a  country  ;  and  they 
so  use  it,  that  every  one  who  needs  it,  and  can  give  the 
requisite  assurance  that  it  will  be  well  used,  can  obtain 
it.  They  thus,  by  giving  facilities  to  the  extension  of 
credit,  enable  every  individual  to  reap  all  the  benefits 
which  can  arise  from  his  industry,  his  skill,  and  his 
moral  character.  Without  credit,  if  he  possessed  no 
capital,  he  would  be  left  to  the  resources  of  his  simple 
industry,  or  simple  manual  labor.  In  just  so  far,  there- 
fore, as  banks  tend  to  the  extension  of  this  kind  of 
credit,  they  confer  a  benefit  upon  the  industrious. 
Thus,  every  one  may  have  the  opportunity,  so  far  as  the 
capital  of  the  country  will  allow,  to  unite  his  industry 
with  capital,  and  reap  the  resulting  advantage  ;  and,  on 
the  other  hand,  all  the  capital  of  the  country  is  enabled 
to  be  united  with  industry,  and  thus  it  is  all  employed, 
m  some  way,  in  the  business  of  production.  The  nearer 
any  community  approaches  to  such  a  state  of  things  as 
this,  the  more  intense  will  be  its  industry,  and  the 
greater  its  productiveness. 

So  far  as  banks  confine  themselves  within  these  limits, 
they  are  advantages  to  the  community.  It  is,  however, 
but  too  manifest,  that  they  may  be  greatly  perverted 
from  these  their  legitimate  objects.  Thus,  instead  of 
lending  to  the  industrious  producer  of  small  means,  they 
may  lend  to  the  wealthy  capitalist  at  the  ordinary  rate 
of  interest,  that  he  may  loan  to  the  producer  at  exorbi- 
tant interest.  Instead  of  benefiting  the  producer,  they 
thus  allow  themselves  to  be  used  as  the  instruments  for 
Heecing  him.  Or  again,  they  may  lend  to  capitalists  for 
the  purposes  of  speculation  ;  thus  enabling  them  to  raise 
to  whatever  amount  they  please,  the  price  of  the  most 
important  necessaries  of  life.  Or  still  further,  the  banks 
themselves  may  become  purchasers,  and  may  buy  up, 
on  their  own  account,  the  most  valuable  staple  of  a 
country,  for  the  sake,  as  in  the  preceding  case,  of  deriv- 
ing enormous  profits  by  the  monopoly.  When  banks 
in  consequence  of  such  transactions  become  embar- 
rassed, their  resort  is  to  a  suspension  of  specie  pay- 
ments.    The}  are  thus  enabled  to  keep  up  the  price  of 


UTILITY    OF    BANKS    OF    DISCOUNT.  257 

•vhatever  they  have  to  sell,  and  to  pay  off  their  debts  in 
depreciated  currency.  And  what  is  strange,  they,  not 
! infrequently,  persuade  the  community,  that  this  course 
rs  taken  entirely  for  the  public  good.  Such  conduct 
should  always  without  fail  work  the  forfeiture  of  the 
charter  of  a  bank,  whatever  might  be  the  consequences. 
When  banks  transact  their  business  in  this  manner,  they 
become  a  nuisance.  By  sudden  expansions  and  contrac- 
tions of  the  currency,  they  embarrass  and  empoverisli 
the  industrious  dealer  and  enrich  the  money  lender,  the 
bonds  of  duty  in  the  meantime  are  sadly  relaxed,  and 
the  moral  principles  of  the  mercantile  community  suffer 
a  frightful  deterioration. 

And  still  more.  As  banks  are  permanent  corpora- 
tions, of  which  the  laws  and  resources  are  known,  they 
present  an  inducement  for  the  investment  o(  foreign 
capital.  This  is  always  an  advantage  to  any  country, 
provided  the  capital  be  profitably  employed  and  net 
squandered  in  useless  investments.  Capital  will  never 
be  invested,  in  any  country,  unless  the  rate  of  interest 
in  the  country  where  it  is  invested,  is  higher  than  in  that 
from  which  it  is  sent.  In  this  case,  the  former  country 
derives  the  advantage  from  the  difference.  If  money 
can  be  borrowed  in  London,  at  four  pei  cent.,  and  be 
used  here,  at  ten  per  cent.,  we  have  the  benefit  of  the 
use  of  the  money,  and  of  six  per  cent.,  in  addition.  In 
this  manner,  money  is  constantly  borrowed  by  a  new 
country  from  an  old,  with  great  advantage  to  both,  but 
specially  to  the  new  country. 

If  such  be  the  utility  of  banks,  in  this  point  of  view, 
It  is  of  importance  that  their  arrangements  should  be  so 
made,  as  to  loan,  on  the  most  convenient  terms,  to  those 
who  are  able  to  gfve  proper  securit}'.  The  mode,  in 
this  country,  is  by  receiving  a  note  of  baud,  with  approv- 
ed endorsers,  and  made  payable  at  a  specified  time,  saj 
at  sixty  or  ninety  days.  The  bank,  however,  allows  no 
interest  on  deposits  made  by  the  drawer  of  the  note. 
This  mode  of  transacting  business,  answers  a  very  val- 
iiabh  purpose  ;  but,  it  may  be  questioned,  whether  its 
convenience  migiit  not  be  very  considerably  increased. 
22* 


258  UTILITY    OF    BANKS    OF    DISCOUNT. 

Judging  by  these  principles,  it  would  seem  thai  th^ 
Scottish  banks  were  conducted  more  correctly,  as  well 
as  more  beneficially  to  the  public,  than  any  institutions 
of  the  kind  at  present  known. 

1.  As  offices  of  deposit,  they  receive  all  sums,  not  less 
than  JEIO  sterling;  and,  for  such  deposits,  allow  inter- 
est. Less  sums  than  this  are  placed  in  the  savings 
banks,  until  they  become  sufficiently  large  to  be  deposit- 
ed in  a  bank.  These  deposits  are,  generally,  made  by 
persons  who  labor  in  agriculture  or  manufactures.  The 
whole  amount  thus  deposited,  is  equal  to  about  twenty- 
four  million  pounds  sterling,  or  not  far  short  of  one 
hundred  and  twenty  million  dollars.  This  large  sum^s 
thus  redeemed  from  idleness,  and  added  to  the  produc- 
tive capital  of  the  country. 

2.  They  discount  notes,  as  our  banks  do,  but  they 
have  another  mode  of  loaning,  which  is  called  cash 
credits. 

When  a  man  wishes  a  cash  credit,  he  finds  a  bonds- 
man, who  promises  to  indemnify  the  bank  for  all  that  it 
may  lose,  by  loani/ig  to  him  within  a  certain  sum  ;  or 
else  he  places  real  estate  in  the  power  of  the  bank,  to  a 
sufficient  amount  to  render  it  secure  within  the  sum 
which  he  wishes  to  borrow.  The  bank  then  opens  with 
him  a  cash  account,  or  allows  him  to  draw  for  any  sum 
within  the  specified  amount.  He  is  charged  interest 
only  for  the  amount  which  he  borrows.  As  fast  as  he  is 
in  funds,  he  deposits  all  he  can  spare,  in  the  bank,  and 
for  every  thing  thus  deposited,  he  is  allowed  interest ;  so 
that  his  interest  on  deposits  always  diminishes  the  inter- 
est on  his  debt.  Thus  he  borrows  and  pays,  succes- 
sively ;  and,  at  stated  seasons,  the  accounts  are  ad- 
justed 

The  advantages  of  this  system,  are  :  1st.  That  it 
enables  an  industrious  man  to  procure  credit  to  the 
amount  of  his  real  estate,  and,  hence,  to  do  more  busi- 
ness with  the  same  capital,  than  anywhere  else.  2d. 
That  by  rendering  every  deposit  valuable,  it  stimulates 
him  to  frugality.  3d.  It  enables  the  bank  to  understand, 
more  correctly,  the  state  of  his  affairs,  and,  hence,  to 


UTILITY    OF    BAxXKS    OF    CIRCULATION.  259 

know  how  deserving  he  is  of  confidence.  4th.  That 
this  may  be  done  with  greater  safety,  than  in  any  other 
mode,  is  evident  from  the  facrt,  that  while  the  Scottish 
banks  have  been  hberal  in  their  accommodations,  and 
have,  by  the  acknowledgment  of  all,  been  of  the  most 
important  service  to  that  country,  only  one  of  then)  has 
ever  been  known  to  fail.  These  are,  surely,  the  best 
evidences  of  the  wisdom  of  any  practical  system. 

Such,  I  suppose,  to  be  the  advantages  of  banks,  as  in- 
stitutions of  discount  or  loan. 

III.  On  the  utility  of  Banks ^  as  institutions  of  cir- 
culation. 

I  have  already  shown,  in  what  manner  it  is  possible 
for  banks  to  issue  notes  for  a  larger  amount  than  they  at 
any  moment  actually  possess  in  specie,  and  that  they 
may  do  so,  to  a  certain  extent,  with  entire  safety  to  the 
community.  Should  banks  be  generally  established, 
and  all  of  them  adopt  this  system,  as  they  would  natu- 
rally do,  it  is  evident  that  there  would  be  in  circulation, 
more  paper  than  specie  ;  that  is,  that  the  actual  circula- 
tion would,  to  a  great  extent,  become  paper,  instead  of 
the  precious  metals. 

But  I  have  already  shown,  that  a  community,  in  any 
given  condition  of  exchanges,  requires  no  more  than  a 
given  value  of  the  circulating  medium,  for  its  exchanges. 
If  the  amount  be  increased,  its  value  will  diminish,  and 
vice  versa.  If  it  need  an  amount  equal  to  a  million  bush- 
els of  wheat,  no  more  than  this  can  be  employed,  and  if 
more  be  introduced,  its  value  will  fall,  till  it  become 
equal  to  a  million  bushels  of  wheat. 

Now,  by  issuing  paper  money,  the  whole  amount  of 
money  is  increased,  and,  hence,  its  price  falls.  But,  as 
ever}  paper  dollar  is  redeemable  in  silver,  its  value  is 
still  equal  to  that  of  a  silver  dollar.  Hence,  the  whole 
amount  of  currency,  silver  and  paper  together,  falls  in 
price,  so  that  money  becomes  cheap,  and  you  can  buy 
more  abroad  with  a  silver  dollar,  than  you  can  buy  with 
a  silver  dollar,  at  home.  Now,  in  this  state  of  things, 
if  the  paper  and  coin  were  equally  valuable  in  foreign 
countries,  either  would  be  exported,  at  pleasure.      But, 


260  UTILITY    OF    BANKS    OF    CIRCULATION. 

inasmuch  as  only  the  metal  is  valuable  abroad,  this,  ex- 
clusively, is  sent  out  of  the  country,  in  the  purchase  of 
other  articles.  And,  it  will  be  sent  out,  until  the  price 
of  the  circulating  medium  at  home,  is  reduced  to  its  or- 
dinary price  in  other  countries. 

Suppose  that  two  thirds  could  be  thus  sent  away  with- 
out impairing  the  soundness  of  the  currency  at  home. 
Business  would  then  go  on  as  securely,  and  as  well,  as 
it  d'd  before.  But,  these  two  thirds  would  procure  in 
exchange  an  equal  amount  of  other  capital,  by  which  the 
wealth  of  the  country  is  by  so  much  increased.  In  the 
mean  time,  al  the  exchanges  of  the  country  are  carried 
on  by  means  of  the  remaining  one  third,  plus  the  ex- 
pense of  the  manufacture  and  management  of  the  cheaper 
commodity,  paper ;  that  is,  the  given  operation,  ex- 
change, is  carried  on  by  means  of  an  instrument,  which 
costs  only  about  one  third  of  the  expense,  which  the 
former  instrument  cost. 

This,  then,  is  the  advantage  of  banks  of  circulation. 
They  furnish  to  the  community  a  cheaper  article  of  ex- 
change. And  the  extent  of  the  benefit  is  easily  estimat- 
ed. If  the  whole  of  the  metallic  circulating  medium 
were  exchanged  for  paper,  we  should  have  the  benefit 
of  the  interest  of  this  whole  amount.  If  twenty  millions 
of  specie  were  wanted  to  carry  on  the  exchanges  of  this 
country,  and  the  whole  were  exchanged  for  paper,  we 
should  be  benefited  to  the  amount  of  the  annual  interest 
of  twenty  millions,  or,  at  six  per  cent.,  of  one  million 
two  hundred  thousand  dollars  per  annum.  If  three 
fourths  of  it  were  sent  away,  our  benefit  would  be  equal 
to  nine  hundred  thousand  dollars  per  annum.  This  is 
.  the  whole  pecuniary  advantage  of  a  paper  currency,  over 
a  metallic.  It  consists  in  substituting  a  cheaper  for  a 
dearer  circulating  medium.  And,  our  annual  advantage, 
supposing  the  cheaper  to  be  equally  good,  is  precisely 
nqual  to  the  interest  of  the  difference. 

This  deserves  to  be  seriously  considered.  Banks  do 
not  create  capital.  The  issuing  of  paper  money,  does 
not  render  money  abundant.  If  it  be  issued  to  such  an 
extent,  that  its  siundress  is  doubted,  it  produces  an  ef 


PAPER  AND  SPECIE  CIRCULATION.      261 

feet  precisely  the  reverse.  If,  while  it  is  perfectly 
sound,  it  be  issued  to  an  amount  beyond  the  wants  of  the 
community,  specie  will  be  exported,  until  the  equilibrium 
is  restored.  If  but  twenty  millions  of  value  be  needed 
in  exchange,  you  can  employ  but  the  value  of  twenty 
millions.  The  only  bene6t  of  a  paper  currency,  sup- 
posing it  to  be  perfectly  sound,  over  a  metallic  currency, 
is  first,  its  greater  convenience  in  exchange  ;  and,  seC' 
ondly,  that  it  enables  us  to  use  a  cheaper  instrument  in- 
stead of  a  dearer,  and  to  employ  the  amount  of  the  dif- 
ference in  the  various  operations  of  human  industry. 


SECTION  III. 

ADVANTAGES    AND    DISADVANTAGES    OF    A    PAPER 
CIRCULATION. 

Having  thus  endeavored  to  illustrate  the  nature  of  a 
paper  circulation,  it  may  be  of  some  importance  to  ex- 
plain, in  as  simple  a  form  as  possible,  the  advantages  and 
disadvantages  which  appertain  to  it. 

1.  The  advantages  of  a  paper  circulation.  These  are 
Iwo,  economy  and  convenience 

I.   Economy. 

1.  The  material  in  use,  in  a  paper  circulation,  as  we 
have  shown,  is  of  much  less  value  than  that  in  a  specie 
circulation.  A  bill  worth  one  thousand  ounces  of  silver, 
may  not  cost  more  than  two  or  three  cents.  Now,  in 
just  so  far  as  a  paper  circulation  accomplishes  the  same 
result  as  specie,  and  accomplishes  it  at  a  less  price,  the 
coifimunity  is  the  gainer  by  the  difference. 

2.  The  wear  and  tear  of  paper  money,  as  well  as  the 
original  cost,  is  less  expensive  than  that  of  silver  .nd 
gold.  Were  silver  and  gold  transported,  as  paper  mon- 
ey now  is,  the  friction  would  reduce  the  weight  of  coin 
80  rapidly,  that  new  emission?  would  be  much  more 
frequently  necessary. 


^2  PAPER    AND    SPECIE    CIRCULATION. 

3.  But,  specially,  as  the  introduction  of  paper  money 
renders  a  considerable  part  of  the  specie  formerly  em- 
ployed, useless,  it  may  be  exchanged  for  other  capital. 
Specie  is,  in  itself,  incapable  of  production.  If  a  pail 
of  it  will  answer  the  purposes  of  excliange,  all  the  re- 
mainder may  be  changed  for  productive  capital.  Hence, 
the  gain,  as  has  been  shown  in  the  preceding  section,  is 
equal  to  the  amount  of  this  difference  employed  in  pro- 
ductive, and  the  same  amount  employed  in  unproductive 
capital.  If  five  millions  can  be,  without  injury,  dis- 
pensed with,  the  benefit  is  equal  to  the  difference  be- 
tween five  millions  in  productive  and  five  millions  in  un- 
productive capital. 

II.    Convenience. 

1.  Paper  money  is  much  more  easily  transported. 
To  travellers,  and  men  in  the  ordinary  affairs  of  life, 
this  is  a  matter  of  considerable  consequence.  Specie 
is  heavy  and  burdensome.  Any  amount  of  paper  money 
which  a  man  needs,  may  be  comprised  in  as  small  a  bulk 
as  he  chooses.  When  large  transfers  of  money  are  to 
be  made  between  distant  places,  the  additional  conven- 
ience and  security  are  still  more  evident. 

2.  Paper  money  is  less  liable  to  robbery.  As  we 
can  render  its  bulk  whatever  we  please,  it  can  be  more 
readily  concealed,  if  we  doubt  the  honesty  of  our  asso- 
ciates. Specie  is  heavy,  bulky,  and  noisy,  and,  hence, 
its  presence  is  unavoidably  discovered. 

3.  Paper  money,  if  stolen,  is  more  easily  identified, 
and,  hence,  more  easily  recovered.  A  man,  by  noting 
the  number  and  marks  of  a  bank  bill,  may  safely  swear 
to  its  identity  ;  but,  inasmuch  as  coin  is  intentionally  all 
alike,  this  would  be  impossible  in  the  case  of  specie.* 

These  are  the  principal  advantages,  so  far  as  I  can 
see,  of  a  paper  currency.  If  there  be  any  others,  J 
have  not  been  able  to  discover  them. 

On  the  other  hand,  its  disadvantages  are  three,  viz  : 
Its  liability  to  forgery,  to  fraud,  and  to  fluctuation. 

*  The  inconveniences  here  spoken  of,  apply  chiefly  to  silver.  Gold 
ripresents  so  large  a  value  that  in  any  moderate  amount  it  may  be, 
vritfaout  difficulty,  transported. 


PAPER  AND  SPECIE  CIRCULATION.      263 

T.  It  is  liable  to  forgery.  The  risk,  in  this  respec  t, 
from  the  use  of  bank  paper,  is  considerable.  The  se- 
curity from  signatures  is  small,  since  good  penmen,  by 
practice,  can  easily  learn  to  imitate  any  signature.  The 
principal  security  arises  from  the  quality  of  the  engraving 
and  of  the  paper.  But,  as  any  one,  who  can  engrave 
sufficiently  well,  can  so  engrave  a  false  bill,  that  no  ordi» 
nary  examiner  can  distingmsh  it  from  a  true  one  ;  evei) 
man  is  hable  to  be  imposed  upon,  and  to  suffer  a  total 
loss,  to  the  exact  amount  of  the  imposition.  It  is  true, 
that  coin  is  also  liable  to  be  falsified  ;  but,  the  process  is 
much  more  difficult  and  expensive  than  that  of  engrav- 
ing. False  coin,  being  liable  to  detection  from  its  color, 
weight,  and  sonorousness,  is  more  readily  detected,  in- 
asmuch, therefore,  as  the  liability  to  counterfeiting,  is 
greater  in  paper  money  than  in  specie,  this  difl'erence  is 
to  be  set  down  in  the  list  of  the  disadvantages  with  which 
it  is  chargeable. 

On  this  account,  banks  which  issue  paper  money,  are 
under  obligations  to  take  every  precaution  to  render  their 
bills  as  little  liable  to  be  counterfeited,  as  possible.  The 
greatest  security,  as  we  have  remarked,  is  in  the  excel- 
lence of  thje  engraving,  and  in  the  peculiarity  of  the  pa- 
per. Hence,  they  should  employ,  for  the  engraving  of, 
their  bills,  none  but  the  best  artists  ;  and  thii?  employ 
talent,  which  would  be  under  no  temptation  to  engage  in 
counterfeiting.  They  should  never  use  plates  which 
have  been  so  much  worn,  as  to  render  the  impression 
coarse,  indistinct,  and  easily  imitated.  A  bank  which, 
to  save  expense,  uses  a  worn-out  plate,  enriches  itself,  at 
the  expense  of  the  public.  I  see  no  reason  why  a  bank, 
which  issues  bills  of  this  description,  and  thus  takes  no 
painj  to  secure  the  public  against  fraud,  should  not  be 
liable  to  pay  the  false,  as  well  as  the  true  bills.  Were 
this  d'^e,  more  care  would  be  used,  and  counterfeiting 
would  become  far  less  common. 

II.  Fraud.  I  have  elsewhere  shown,  that  if  the 
capital  orf  a  bank  be  all  paid  in,  and  the  notes  which  it 
holds  against  individuals,  and  which  it  has  received  m 
exchange  for  its  bills,  be  all  good,  the  holder  of  its  bills 


264  PAPER    AND    SPECIE    CIRCULATION. 

has  iwo  perfectly  good  securities.  '  Were  all  the  capital 
stolen,  he  would  be  safe  ;  and,  were  all  the  notes  bad, 
the  capital  remaining,  he  would  still  be  safe.  We  have 
also  shown,  that  he  would  always  be  safe,  so  long  as  the 
capital  actually  paid  in,  was  sufficient  to  cover  any  defi- 
ciency which  might  arise  from  a  failure  of  the  debtors 
of  the  bank.  And  in  the  worst  event,  supposing  no 
loans  to  be  made  for  a  longer  period  than  60  days,  the 
holder  of  the  bill  could  not  be  obliged  to  wait  at  furthest 
longer  than  that  time.  And,  with  ordinary  skill  and  fidel- 
ity, it  is  manifest,  that  the  issues  of  a  bank  may  always 
be  kept  within  this  limit,  and  thus  the  holder  of  its  bills 
mcur  no  risk. 

But  neither  the  skill  nor  the  fidelity  of  man  is  always 
to  be  trusted.  Hence,  banks  frequently  fail,  and  in- 
flict either  a  partial  or  a  total  loss  upon  the  community. 

I.  Banks  may  fraudulently  commeiice  issues,  when 
only  a  part^  or  when  not  even  any  part,  of  their  capital 
has  been  paid  in.  Suppose  that  only  a  part  of  their  cap- 
ital be  paid  in;  then  the  pubHc,  instead  of  having  a  guar- 
antee equal  to  the  whole  amount  of  its  capital,  over  and 
above  the  notes  of  individuals  held  by  the  bank,  has  a 
guarantee  equal  only  to  the  amount  of  the  part  paid  in. 
If  the  capital  of  a  bank  be  one  hundred  thousand  dollars, 
and  only  ten  thousand  dollars  be  paid  in,  and  the  bank 
issue  one  hundred  and  fifty  thousand  dollars  in  bills,  it 
possesses  only  a  guarantee  of  ten  thousand  dollars,  to 
ensure  the  payment  of  one  hundred  and  fifty  thousand 
dollars  by  the  debtors  of  the  bank.  Upon  the  least 
commercial  pressure,  »r  in  case  of  loss  by  accident  or 
lobbery,  such  a  bank  must  fail,  and  the  holders  of  the 
bills  must  suffer  a  loss  equal  to  the  deficiency  by  the 
failure  of  the  debtors  of  the  bank,  the  costs  of  closing  its 
concerns,  and  the  loss  of  interest  until  its  bills  have  been 
paid. 

Again :  Suppose  that  none  of  the  capital  stock  were 
paid  in,  but  that  the  stockholders  simply  gave  their 
notes  for  their  shares.  The  security  would  then  be 
precisely  equal  to  the  average  goodness  of  the  notes  of 
individuals   received   by  the  bank,  in  exchange    for  it« 


PAPER  AND  SPECIE  CIRCULATION.       265 

bills.  It  would  have  no  capital  on  hand  to  redeem 
these  bills,  and,  on  the  least  pressure  for  specie  pay- 
ments, it  must  fail.  The  notes  of  individuals  in  a  time 
of  scarcity  of  money  would  be  worth  much  less  than  par; 
and,  as  the  stockholders  would  pay  for  their  notes  which 
ihey  gave  for  shares,  by  surrendering  up  the  shares  for 
ivhich  they  gave  them,  the  whole  loss  would  fall  on  tlie 
Holders  of  the  bills. 

Agfin :  Suppose  that,  as  in  the  last  case,  no  stock 
were  paid  in ;  that  the  stockholders  were  the  directors 
themselves,  and  that  they  accommodated  themselves 
with  money  without  ever  requiring  notes  of  each  other. 
Here,  there  would  be  no  security  whatever,  either  in 
bank  capital,  or  in  the  notes  of  individuals.  In  such  case, 
the  bank  must  speedily  stop  payment,  md  the  whole 
loss  of  its  issues  would  fall  upon  the  holders  of  its  bills. 
This,  as  well  as  the  last  case,  is  nothing  more  than  a 
fraudulent  arrangement  for  picking  the  pockets  of  the 
public,  on  an  extensive  scale.  It  is  nothing  more  nor 
less,  than  downright  swindling,  and  should  expose  a  man 
to  the  same  punishment  as  house  breaking. 

Nor  is  this  danger  merely  imaginary.  The  amount 
lost  by  the  public  from  the  failure  of  banks  is  actually 
enormous.  Mr.  Gallatin,  a  most  able  and  competent 
authority  on  this  subject,  in  his  pamphlet  on  the  curren- 
cy, has  made  the  following  statement,  which,  from  the 
character  and  accuracy  ol'  the  author,  is  entitled  to  full 
credit. 

"  We^have  an  account  of  one  hundred  and  sixty-five 
banks  which  have  failed  "between  the  first  of  January, 
181 1,  and  the  first  of  July,  1830.  The  capital  of  one 
hundred  and  twenty-nine  of  them,  amounted  to  moie 
than  twenty-four  millions  of  dollars,  stated  as  having 
been  paid  in.  The  whole  amount  may  be  estimated  at 
nearly  thirty  millions,  and  our  list  may  not  be  complete. 
The  capital  of  the  State  banks  now  existing,  amounts  to 
about  one  hundred  and  ten  millions.  On  a  total  capital 
of  one  hundred  and  forty  millions,  the  failures  have 
amounted  to  thirty,  or  more  than  one  fifth  of  the  whole. 
Of  the  actual  loss  incurred,  we  can  give  no  account. 
23 


306      PAPER  AND  SPECIE  CIRCULATION. 

There  are  instances  in  which  the  stockholders,  by  paying 
for  their  shares  in  their  own  notes,  and  afterwards  re- 
deeming their  notes  with  the  stock  in  their  name,  suffered 
no  loss,  and  this  loss  fell  exclusively  on  the  holders  of 
notes,  and  the  depositors.  In  many  cases,  when  the 
whole  stock  has  been  lost,  the  holders  of  notes,  never- 
theless, suffered  a  partial  loss.  In  the  most  favorablp 
cases,  the  stockholders  lost  a  considerable  portion  of  the 
stock,  and  all  the  debts  will  be  ultimately  paid.  But 
even  here,  there  has  been  a  heavy  loss  to  the  communi- 
ty, the  notes  baring  been  generally  sold  by  the  holders 
at  depreciated  rates,  when  the  failure  took  place.  Wo 
believe  that  the  pecuniary  loss  sustained  by  government, 
on  loans  raised  during  the  suspension  of  specie  pay- 
ments, and  from  bank  failures,  exceeded  four  millions 
of  dollars."* 

Now,  when  a  currency  is  liable  to  such  results,  from 
fiaud  or  folly,  that  is,  when  skill  and  integrity  must  enter 
as  an  element  into  its  goodness,  the  risk  which  a  commu- 
nity sustains  in  the  use  of  it,  must  certainly  be  placed  in 
the  list  of  its  disadvantages. 

Nor  are  these  evils  peculiar  to  this  country.  In  Eng- 
land, in  the  year  1793,  as  we  are  informed  by  McCul- 
loch,  one  third  of  the  country  banks  stopped  payment 
And  we  learn  by  the  daily  newspapers,  that  the  failures 
of  private  bankers  are  matters  of  very  frequent  occur- 
rence. Between  the  years  1809  and  1830,  the  number 
of  commissions  of  bankruptcy,  issued  against  country 
bankers   in   England,  was  three  hundred    and   eleven. 

•  Since  the  above  was  written,  the  "  United  States  Bank  of  Penn- 
ey I  vania"  has  failed,  and  its  shares,  of  the  par  vahie  of  100  dollare, 
and  wliich  cost  the  present  holders,  in  many  cases,  120  dollars,  are 
soiling  at  the  nominal  price  of  5  or  6  dollars.  They  are,  in  fact,  con- 
sidered worthless,  and  the  bills  of  the  bank  are  selling  at  60  cents  for 
the  dollar.  Thus,  the  whole  capital  of  this  institution,  '^.5  millions 
of  dollars,  has  in  two  or  three  years  vanished,  and  I  fear  that  neither 
seer,  nor  prophet,  nor  jury  will  ever  tell  us  where  it  has  gone  And 
Ih/s  mismanagement  or  fraud  was  committed  by  men  who  were  eel- 
ebiated  as  models  of  finance,  ability,  and  disinterested  patriotism, 
and  in  a  city  proud  of  its  mercantile  faith.  It  is  surely  not  remarka- 
ble if,  with  such  facts  recent  in  their  recollection,  there  should  aiise 
•  n  the  minds  of  the  people,  a  serious  distrust  of  banks. 


rAPER   AND    SPECIE    CIRCULAllON.  267 

"  Exclusive  of  the  above,  many  banks  stopped  payment, 
to  the  great  injury  of  their  creditors  and  the  pubhc, 
which  afterwards  resumed  tliera;  while  the  affairs  of 
some  bankrupt. concerns  were  arranged  without  a  com- 
mission." Yet,  it  would  seem,  there  are  means  which 
may  be  devised  to  remedy  this  evil;  for  he  informs  us 
that,  "during  this  whole  period,  not  a  single  Scottish 
bank  gave  way.^^ 

III.  Fluctuation.  In  speaking  of  a  metallic  curren- 
cy, we  had  occasion  to  remark,  that  it  was  essential  to 
ihe  character  of  whatever  was  used  as  money,  that  it 
be  liable,  as  Httle  as  possible,  to  fluctuation.  Hence, 
vegetable  products,  of  which  the  amount  created  was 
liable  to  vary  under  the  same  amount  of  labor,  with  the 
different  productiveness  of  seasons,  could  never  be  em 
ployed  as  money.  The  reason  is  obvious.  He  who 
contracted  debts,  when  money  bore  one  ratio  to  prod- 
ucts, would  pay  them  when  it  bore  another  ratio;  and 
hence,  though  he  might  pay  the  same  nominal  amount, 
yet  he  might  pay  twice  as  much  in  value  as  he  had 
promised.  So,  also,  he  who  had  loaned  money  while 
it  bore  one  ratio,  and  received  his  payments  while  it  was 
at  another,  though  he  might  receive  the  same  nominal 
amount,  might  not  receive  half  the  amount  in  value 
which  he  loaned.  And  hence,  all  civilized  communi- 
ties have  denied  to  governments  the  right  of  altering,  or 
in  any  manner  interfering  with,  the  value  of  coin  ;  for  the 
reason  that  this  cannot  be  effected  without  causing  a 
variation  in  the  value  of  money,  and  thus  interfering 
with  private  contracts.  Were  this  allowable,  is  is  evi- 
dent that  credit  must  be  at  an  end ;  because,  whatever 
a  contract  might  mean  to-day^  no  one  could  possibly 
predict  what  it  would  mean  to-morrow.  Hence,  all 
fluctuation  in  the  value  of  any  substance,  renders  it,  by 
the  amount  of  this  fluctuation,  unfit  for  the  purposes  of 
0  circulating  medium.  If  gold  and  silver  were  as  fluc- 
tuating in  value  as  cotton  or  wheat,  they  would,  their 
bulk  only  excepted,  be  as  unfit  for  the  purposes  of  mon- 
ey, as  these  substances  themselves. 

Now,  these  remarks  apply,  not  only  to  gold  and  5il- 


PAPER  AND  SPECIE  CIKCULATIOW. 

ver,  but  to  any  thing  which  may  be  used  as  inJney 
They  apply  to  silver,  as  much  as  lo  gold,  and  to  gold 
as  much  as  to  silver.  If  either  of  these  substances  were 
hable  to  great  fluctuations  in  value,  we  §hould  be  oblig- 
ed to  abandon  it,  and  to  take  the  other.  If  both  of  them 
were  so  liable,  we  should  relinquish  them  both,  and  find 
a  better  substance.  And,  if  paper  be  used  as  the  circu* 
la  ting  medium,  the' case  is  the  same.  By  as  much  as  il 
is  liable  to  sudden  or  to  great  fluctuation,  by  so  much  ij 
it  unfit  for  the  purposes  of  money.  And,  when  onco 
paper  has  supplied  the  place  of  gold  and  silver,' Jt  be- 
comes the  circulating  medium  as  truly  as  gold  uud  silver 
were,  whea  they  suppUed  the  place  of  copper,  or  sheep, 
or  cattle. 

Now,  the  disadvantage  to  which,  as  we  havd  said, 
paper  money  is  exposed,  is,  that  it  is  liabL*  to  sudden 
and  great  fluctuations  in  value. 

The  manner  in  which  this  occurs,  is  easily  explained. 

We  have  already  shown  that,  in  order  to  accomplish 
a  given  amount  of  exchanges  in  a  community,  a  certain 
amount  of  value  is  necessary  ;  and  that  no  more  than 
this  amount  of  value  can  be  employed  for  this  purpose. 
If,  to  accomplish  the  exchanges  of  a  community  at  a 
given  time,  one  thousand  ounces  of  silver,  equal  to  one 
thousand  bushels  of  wheat,  are  necessary,  and  twice  this 
quantity  be  introduced,  the  value  will  remain  the  same, 
though  the  quantity  varies  ;  and  the  result  will  be,  that 
the  price  of  money,  in  relation  to  other  products,  will 
fall  one  half;  thatis,  if  we  gave  five  dollars  for  a  hat 
before,  we  shall  give  ten  dollars  now,  and  for  other 
things  in  proportion.  And,  if  half  the  quantity  were 
removed,  the  reverse  would  be  the  case  ;  that  is,  the 
price  of  money  would  be  doubled  ;  in  other  words,  if 
we  gave  five  dollars  for  a  hat,  formerly,  we  should  give 
two  dollars  and  fifty  cents  for  it  now  ;  and  so  of  other 
productions. 

If  wc  bear  this  principle  in  mind,  we  shall  easily  sec 
the  nature  of  the  fluctuations  to  which  paper  money  is 
liable.  Metallic  money  has  a  natural  price,  which  is 
jot  liable  to  any  fluctuation  within  short  periods.     This 


PAPER  AND  SPECIE  CIRCULATION.      269 

price  depends  upon  the  cost  of  mining,  which  is  liable 
to  very  little  variation.  He  who  exchanges  a  thousand 
bushels  of  wheat  for  a  thousand  ounces  of  silver,  knows 
that  it  will  cost  as  much  to  bring  an  ounce  of  silver  into 
the  market,  s'x  months  hence,  as  it  does  now,  and 
hence,  its  cost  being  the  same,  it  will  bring  for  him  as 
much  of  other  products,  six  months  hence,  as  it  does 
now  ;  that  is,  if  this  be  the  sole  medium  of  exchange,  and 
its  value  be  not  interfered  with  by  the  use  of  some  oihei 
substance.  Now,  paper  money  has  no  such  natural 
price  ;  but  the  quantity  of  it  in  circulation  depends,' con 
isideiably,  upon  the  hopes.,  wishes^  and  anticipations  of 
men.  Hence,  the  quantity  may  vary  in  almost  any 
•mount,  and,  as  the  value  of  the  whole  is  not  altered  by 
the  quantity  in  use,  as  the  quantity  increases,  the  value  of 
each  portion  must  decrease  ;  and,  hence,  a  paper  dollar 
may  be  worth  twenty-five  per  cent,  more  or  less  to-day, 
titan  it  was  a  month  ago,  or  than  it  will  be  a  month  to 
come.  Though  there  may  be  the  same  words  written 
upon  the  paper,  and  it  be  called  by  the  same  name,  yet 
it  means,  to  him  who  pays  it,  and  to  him  who  receives 
it,  a  very  different  thing  from  what  it  did  a  month  ago. 
He  bought,  three  months  ago,  a  thousand  barrels  of 
flour,  at  ten  dollars  a  barrel,  at  three  months  credit. 
Without  any  change  in  the  supply  or  demand  for  flour, 
he  is  not  now  able  to  sell  it  for  more  than  seven  dollars 
a  barrel,  while  his  notes  for  ten  thousand  dollars  must 
be  paid  in  full. 

This  fluctuation  may  arise,  on  the  part  of  the  bank 
innocently  or  viciously  ;  from  want  of  skill  and  fore- 
thought, or  from  want  of  integrity.  ^ 

I.  Innocently.  Suppose  that,  at  a  given  period,  the 
ritculating  medium  in  a  community  is  properly  propor* 
tioned  to  the  necessities  of  exchange,  and  that  this  me- 
dium, (hough  paper,  is  perfectly  sound  ;  that  is,  that 
there  exists,  in  all  the  banks,  sufficient  specie  to  pay  all 
detts  of  the  bank,  on  demand,  in  the  precious  metals. 

Let,  now,  from  any  cause  whatever,  the  productive- 
ness of  labor  be  greatly  increased,  so  that  a  much  larger 
amount  of  annual  products  is  brought  into  mari^et.     If  (he 
23» 


27d  PAPER    A>D    SPECIE    CIRCULATION. 

amount  of  money  remain  the  fame^  while  the  amount  ol 
products  is  increased^  the  price  of  money  will  rise  ;  that 
is,  every  thing  will  be  cheap.  As  soon  as  products 
become  cheap,  every  one  is  anxious  to  buy.  Merchants 
will  be  desirous  to  borrow  money,  with  which  to  buy, 
because,  when  products  are  cheap,  it  may  be  reasonably 
expected  that  the  price  will  rise  ;  and,  if  the  rise  in 
price  be  greater  than  the  interest  paid  for  money,  the 
|)iirchaser  may  reasonably  hope  to  be  able  to  repay  what 
he  borrowed,  with  interest,  and  yet  realize  a  handsome 
profit.  Besides,  when  an  article  is  low  in  any  country, 
then  is  the  time  to  export  it  with  advantage  ;  and  this 
prospect  of  increased  advantage  will  induce  men  to  bor- 
row, in  order  to  export,  in  the  expectation  that  the  usual 
profit  will  enable  them  to  realize  far  more  than  the  inter- 
est they  have  paid  for  borrowed  capital.  In  such  a  sea- 
son, every  one  is  desirous  of  borrowing,  and  banks  can 
most  profitably  employ  their  capital.  They  are  called 
upon  to  loan,  to  the  utmost  extent  of  their  power,  both 
by  their  own  interest,  and  by  the  universal  wish  of  the 
public. 

Now,  in  such  a  state  of  things,  it  is  not  to  be  sup- 
posed that  the  directors  of  the  banks  are  endowed  with 
greater  prudence  than  other  men,  or  that  they  are  not  as 
likely  to  be  influenced  by  the  hope  of  large  dividends. 
The  example  of  one  stimulates  the  others.  The  risk 
that  one  institution  runs,  another  will  be  willing  to  run. 
A  bank  will  scarcely  be  willing  to  make  a  dividend  of 
six  per  cent.,  while  its  neighbor  is  making  eight.  And 
when  disconnected  banks,  all  over  a  nation,  are  animated 
Dy  these  principles,  it  is  evident  that  a  very  large  amount 
of  loans  must  be  effected  ;  that  is,  a  very  large  amount 
of  paper  money  must  be  issued.  For  the  same  reason, 
at  such  a  time,  a  great  number  of  additional  banks  will 
be  incorporated,  and  all  will  be  watched  over  with  less 
than  usual  vigilance.  But  just  so  fast  as,  beyond  the 
necessary  amount,  the  quantity  is  increased,  the  value 
of  each  portion  of  it  diminishes,  and  thus  prices  rise  ; 
that  is,  money  becomes  abundant,  and  a  dollar  will  pur> 


PAPER    AND    SPECIE     CIRCULATION.  271 

chase  no    more   than   it   would   in  a   time   of  scarcity 
Thus,  the  amount  of  the  circulating   medium  becomes 
too  great  for   the  amount   of  exchanges,  and    money  is 
cheaper  than  any  other  article  in  the  market. 

But,  we  have  before  seen,  that  the  cheapest  article  in 
the  market  will  always  be  exported.  As  this  is  now 
money,  money  will  be  exported.  But,  as  the  bills  are 
redeemable  in  specie,  specie  is  worth  no  more  than 
bank  bills  ;  and,  as  the  bills  are  worth  nothing  abroad, 
the  whole  exportation  will  be  in  coin.  In  a  short  time,  a 
large  portion  of  it  has  left  the  country.  The  banks  then 
find  themselves  liable  to  pay  in  specie,  a  vastly  greater 
amount  than  they  were  liable  to  pay,  a  month  or  two 
since,  and  they  find  that  they  have  much  less  specie 
wherewith  to  pay  it  ;  and  the  demand  for  specie  still 
continues.  They  are,  of  course,  in  danger  of  stopping 
payment,  and  their  only  means  of  safety  is,  in  diminish- 
ing their  loans  ;  that  is,  loaning  no  more,  and  requiring 
payment  of  those  who  owe  them.  Hence,  those  who 
had  borrowed,  with  the  hope  of  paying  by  means  of 
their  sales,  are  called  upon  to»pay,  before  these  sales 
are  effected,  and,  as  the  banks  refuse  to  loan,  very  few 
are  disposed  to  buy.  Thus,  the  debtors  of  the  bank 
are  required  to  pay  their  debts  sooner  than  they  ex- 
pected, and  the  means  of  making  those  payments  are 
curtailed.  The  money  goes  back  into  the  bank,  and 
does  not  come  out  of  it.  Thus,  with  every  day,  the 
quantity  of  the  circulating  medium  is  diminished.  The 
scarcity  of  money  increases.  The  price  of  goods  falls, 
as  men  will  sell  for  lower  and  lower  prices,  rather  than 
lose  their  credit.  Every  man,  from  necessity,  presses 
his  neigljbor,  and  the  bank,  from  the  same  necessity, 
presses  them  all.  And  thus,  in  a  few  months,  the 
amount  of  circulating  medium  is  greatly  diminished  ;  and 
money  is  worth  twenty-five  or  fifty  per  cent,  more  than 
it  was  a  short  time  ago.  He  who  agreed  to  pay  one 
thousand  ounces  of  silver,  when  one  ounce  of  silver  was 
worth  a  bushel  of  wheat,  pays  it  now,  when  it  is  wrth 
%  buslie{  and  a  half  of  wheat ;  that  is,  though  he  pay  Jie 


SIS  PAPER    AND    SPECIE    CIRCULATION. 

same  nominal  amount,  he  pays  fifty  per  cent,  more  m 
value.*  ♦ 

The  result  of  such  a  state  of  things  depends,  of 
course,  upon  the  degree  of  the  excess  of  these  issues. 
If  this  excess  have  not  been  great,  by  means  of  mutua. 
forbearance,  the  scarcity  passes  away  ;  that  is,  holders 
of  produce,  being  obliged  to  sell  or  to  fail,  sell  at  re- 
duced prices.  Thus,  the  price  of  money  rises,  and  it 
becomes  profitable  to  import  it.  It  is  then  imported  ; 
the  banks  are  thus  enabled  to  discount ;  and  things  go 
on  again,  as  usual  ;  with,  however,  a  severe  loss  if  not 
total  ruin  to  those  who  have  purchased  when  goods  were 
at  high  prices. 

But,  it  is  not  always  thus.  Sometimes  the  pressure 
for  money  is  so  great,  that  those  who  have  purchased 
products  with  borrowed  capital,  cannot  sell  them  fast 
enough  to  make  their  payments.  These  are  obliged  to 
stop  payments,  or  become  bankrupts,  and  assign  their 
effects  to  their  creditors.  But  these  were  debtors  to 
many  others,  who  were  depending  on  the  payment  to  be 
received  from  them,  to*  pay  their  own  debts.  These, 
being  disappointed  in  this  expectation,  also  fail.  Their 
failure  leads  again  to  the  failure  of  others,  and  the  panic 
becomes  general.  No  one  dares  to  trust  his  neighbor, 
and  the  banks  dare  not  trust  any  one.  An  universal 
crash  of  mercantile  credit  succeeds,  and  none  are  able 
to  withstand  the  shock,  save  those  of  the  heaviest  capi- 
tal, and  of  the  greatest  financial  ability. 

This,  however,  at  length  works  its  own  cure.  When 
^a  debtor  fails,  he  assigns  his  property  to  his  creditors  ', 
that  is,  he  pays  them  in  fcinrf,  instead  of  in  money 
Hence,  this  being  done,  his  need  of  money  is  over,  and, 
by  so  much,  diminishes  the  demand.  His  property  is 
sold,  at  any  price  it  willbring.  This  depresses,  still 
more  rapidly,  the  price  of  goods  ;  that  is,  raises  the 
comparative  value  of  money  ;  and  hence,  it  will  be  the 
more  readily  imported.     As  soon  as  these  causes  have 

"The  banks  in  the  city  of  New  York  alone,  witliin  a  few  montha 
lalely,  reduced  their  circulation  to  the  amount  of  more  than  twelve 
lullions  of  dollars. 


PAPER  AND  SPECIE  CIRCULATION.      27b 

bad  time  to  operate  ;  that  is,  diminished  demand  and 
increased  supply  ;  the  equilibrium  is  restored,  and  credit 
is  established  on  its  orJinary  basis. 

The  method  which  has  been  sometimes  resorted  to, 
when  banks  have  either  viciously  or  innocently  become 
unable  to  pay  their  bills,  is  to  suspend  specie  })ayments, 
and  then  prevail  upon  the  State  legislatures  to  pass  laws 
exempting  them  from  the  consequences  of  their  failure. 
This  expedient  has  been  resorted  to,  for  the  second  time 
within  two  years,  by  a  great  part  of  the  banks  in  the 
United  States.  Although  excuses  may  be  rendered  for 
such  a  course,  under  a  universal  and  unexpected  calam- 
ity, there  can  be  no  doubt  that  the  bank  suspensions 
must  work  the  direst  mischief  to  the  community.  With- 
out going  into  the  subject  in  detail,  the  following  consid 
erations  are  sufficient  to  show  the  nature  and  tendencies 
of  such  a  measure. 

1.  The  obligations  of  a  bank  are  as  binding  as  those 
of  an  individual.  There  is  no  reason  why  it  should  be 
exonerated  from  them  more  than  an  individual.  If  a 
merchant  fail  to  pay  his  note  to  the  bank,  his  credit  is 
dishonored  and  he  is  expected  to  pay  interest  from  the 
time  of  his  failure.  There  can  be  no  reason  why  a  bank 
should  not  abide  by  the  rule  which  it  enforces  upon 
others. 

2.  The  only  circumstance  which  gives  any  value  to 
the  bills  of  a  bank  is  the  assurance  that  they  will  be  paid 
in  specie.  But  if  the  bank  is  allowed,  at  will,  to  ab- 
solve itself  from  this  obligation,  what  is  this  assurance 
worth.  This  very  power  conceded  to  banks  would 
lender  a  paper  currency  worthless. 

3.  The  only  restriction  upon  unlimited  issues  pf  pa- 
per money  is  the  obligation  imposed  upon  banks  to  re- 
deem tlieir  bills  at  sight  in  specie.  So  long  as  this  is 
enforced,  the  currency  could  not  readily  become  inju- 
riously expanded.  If  it  be  not  enforced,  or  if  the  bank 
may  be  easily  sheltered  from  the  residts  of  its  impru- 
dence, a  paper  currency  may  be  expanded  illimitably. 
[n  this  manner,  as  in  the  case  of  the  continental  money, 
the  circulating  medium  may  be  rendered  good  foi  nothing 


874       PAFCR  AND  SPECIE  CIRCULATION. 

4.  The  tendency  of  frequent  suspensions  must  be  to 
drive  all  the  specie  out  of  the  country.  In  consequence 
of  over  issues,  prices  will  be  kept  so  much  above  those 
of  other  countries,  that  products  cannot  be  profitably 
exported,  and  specie  will  immediately  take  its  place. 
Thus,  as  soon  as  banks  resume  the  payment  of  their 
debts,  prices  being  high,  they  will  be  again  compelled  tc 
suspend,  and  thus  a  few  such  examples  would  end  in  a 
small  number  of  spasmodic  contractions  and  suspensions, 
to  be  followed  by  a  perpetual  insolvency. 

5.  As  banks  are  at  present  managed,  in  too  many 
instances,  the  officers  of  the  banks  themselves  are  the  . 
principal  borrowers.  By  combination  with  each  other, 
they  may  easily  procure  loans  sufficient  to  control  the 
price  of  any  of  the  necessaries  of  life,  within  a  largo 
district.  If,  when  their  loans  become  due,  the  borrow- 
ers were  obliged  to  make  payment,  they  must  relinquish 
their  monopoly,  and  sell  at  the  natural  prices.  But,  if, 
as  soon  as  they  were  called  upon  to  make  payment  to 
the  bank,  they  could  suspend  specie  payments,  it  is  evi- 
dent that  they  could  prolong  their  loans,  and  keep  up  • 
prices  at  their  will.  The  tendency  of  such  a  course  is 
manifestly  to  set  the  poor  against  the  rich  for  cause,  a 
most  barefaced  oppression. 

These  are  a  few  of  the  most  obvious  reasons  why 
banks  should  always  be  obliged  to  redeem  their  bills,  in 
specie,  and  at  sight.  If  they  fail  to  do  so,  the  legisla- 
tures should  not  shield  them,  but  should  expose  them  to 
the  natural  action  of  law.  A  few  examples  of  this  kind 
would  do  much  to  place  tbe  currency  upon  a  sound  basis. 

In  this  manner,  fluctuation  may  arise  innocently.  And 
every,  one  knows  that  such  fluctuations  are  constantly 
occurring  in  the  mercantile  world.  But  what  occurs 
thus  innocently,  is  liable  to  occur  viciously. 

Tl.  Viciously.  A  bank,  established  in  a  town  remote 
from  the  ordinary  channels  of  business,  or  the  banks  in 
any  one  place,  if  combined  together,  as  ihey  furnish  the 
paper  money  which  is  used  for  all  the  con)mon  purposes 
of  exchange,  have,  to  a  considerable  degree,  the  mo- 
lopoiy  of  the  aiiicle  in  the  market.      Hence,  by  loaning 


PAJ>ER    AND    SPECIE    CIRCULATION.  275 

very  freel)  at  one  time,  they  may  bring  the  whole  district 
into  their  debt.  When  this  is  the  case,  if  the}  see  fit 
to  curtail  their  discounts,  they  may  reduce  the  amount 
of  circulating  medium,  and  raise  the  price  of  money  as 
much  as  they  will.  They  may  thus,  by  enforcing  pay- 
ment, render  half  the  population  bankrupt,  and  possess 
themselves  of  their  estates,  at  half  price  ;  or  else  oblige 
them  to  pay  double  or  treble  the  usual  percentage  of 
interest.  That  such  events  have  occurred,  is,  I  fenr, 
too  much  a  matter  of  history.  And  it  has  given  rise  to 
a  frequent  and  unwarrantable  prejudice  against  banks  in 
general. 

While,  however,  all  thisJs  admitted,  it  deserves  to  be 
remarked  : 

1.  That  these  disadvantages  of  fluctuation,  both  from 
unskilfulness  and  from  fraud,  do  not  belong  exclusively 
to  banks ^  but  are  liable  to  exist  under  any  circumstances, 
in  which  money  is  loaned  and  borrowed.  Were  there 
no  banks,  and  were  money  to  be  loaned  by  private  capi- 
talists, and  even  to  be  loaned  in  specie,  the  same  incon- 
veniences though  in  a  less  degree  would  be  liable  to  re- 
sult ;  for  men  are  always  tempted  to  borrow  to-day, 
more  than  they  will  be  able  to  pay  to-morrow.  And  it 
is  evident  that  collusion,  for  the.  sake  of  raising  the  rate 
of  interest,  may  be  as  liable  to  occur  between  individua 
money  lenders,  as  between  banks. 

2.  The  blame,  when   such  a  state  of  things  as  ha 
been  described,  exists,  is  always  laid  upon  the  bank* 
This  is  manifestly  unjust.     It  belongs  to  the  borrowe* 
just  as  much  as  it  does  to  the  lender.     Men  are  ver) 
willing  to  borrow,  but  they  very  commonly  call  upon  the 
community   for    great    commiseration,    when     they    are 
obliged  to  pay.     I  by  no  means  object  to  the  extension 
of  any  commiseration  which  may  be  convenient,  but  it 
would  be  a  very  inconvenient  extension  of  it,  if  it  releas- 
ed a  «nan  from  the  obligation  to  refund  what  he  had  bor 
rowed,  and,  by  the  use  of  which,  he  has  already,  per- 
haps, realized  a  handsome  revenue.     The  bank,  by  en- 
forcing payments  in  a  time  of  pressure,  is  really  doing  a 
^rcat  service  to  the  community.     This  is  evident.     If 


276  PAPER    AND    SPECIE    CIRCULATION. 

the  debts  due  to  the  banks  were  not  paid,  the  banks 
would  fail,  and  the  whole  circulating  medium  become 
worthless.  So  that,  if,  by  their  exacting  punctuality, 
some  persons  fail,  it  is  still  •  better  that  a  few  persons 
than  that  the  whole  community  should  be  ruined. 

3.  Again  :  In  a  time  of  scarcity,  banks  are  sadly 
abused,  because  they  will  not  loan  more  money.  A 
bank,  if  it  be  honest,  and  mean  to  pay  its  debts,  has  its 
limit,  which  it  cannot  safely  pass,  as  truly  as  an  indiv'u- 
ual.  When  it  has  arrived  at  this  limit,  its  loans  must 
cease.  A  merchant  who  has  involved  himself  in  large 
transactions,  expecting  that  he  could  borrow  as  muc&  as 
he  chose,  is  now  disappointed,  because  his  expectations 
are  not  realized.  But  what  reasori  has  he  to  complain  .' 
The  bank  never  promised  to  lend  him,  when  it  had  noth- 
ing to  lend  ;  nor  to  ruin  itself,  for  thfi  sake  of  saving 
him  from  the  consequences  of  his  own  headlong  improv- 
idence ;  specially,  when  by  doing  this',  it  must  involve 
not  only  itself,  but  him  also  in  ruin.  The  bank  was  nc 
par*ty  to  his  engagements  ;  it  derives  no  benefit  from 
them,  and  it  is  under  no  obligation  to  enable  him  to  fulfil 
them.  The  only  remedy  for  these  evils  manifestly  is, 
for  both  parties  to  be  willing  to  grow  rich  more  slowly, 
and  thus  to  assume  less  formidable  risks.  When  a  whole 
community  has  run  into  transactions  beyond  its  means, 
and  has  become  embarrassed,  there  is  very  little  gainen 
by  the  abuse  of  banks  and  of  bank  directors. 

If  these  remarks  be  just,  there  will  follow  several  very 
obvious  conclusions. 

1.  That  to  lend  money  is  just  as  necessary  to  the 
good  of  the  community,  and  is,  therefore,  as  innoceni 
and  as  honorable  as  to  borrow  it. 

2.  That  an  institution,  organized  for  the  purpose  of 
lending  money,  is,  so  far  as  its  object  is  concerned,  aa 
beneficial  to  the  community,  as  innocent,  and  as  honora- 
ble as  any  other  institution.  • 

3.  That  a  lender  of  money  is  liable  to  be  dishonest 
and  unskilful  ;  but  that  of  a  borrower  of  money  is  also 
liabfe  to  be  dishonest  and  unskilful. 

4.  And  hence,  that  the  one,  as  much  as  the  other,  Is 


AGENCY    OF    GOVERNMENT.  277 

entitled  to  all  the  benefits  of  equal  laws,  and  the  fair  and 
unbiased  execution  of  them.  If  a  bank  conduct  itself 
dishonestly,  this  is  a  reason  why  it  should  be  dealt 
with  according  to  just  and  equitable  law  ;  but  it  is  not 
a  reason  why  all  the  capital  of  the  country  should  be  op- 
pressed, and  every  capitalist  insulted.  A  carpenter  may 
be  dishonest ;  and  this  is  a  reason  why  he  should  be 
dealt  with  according  to  just  and  equitable  law  ;  but  it  is 
no  reason  why  every  carpenter  should  be  oppressed,  and 
his  calling  made  a  cause  of  opprobrium.  The  princi- 
ple which  applies  to  the  one  case,  applies  equally  to  the 
other. 


SECTION   IV. 

OF  THE  AGENCY  OF  SOCIETY,  THAT  IS,  OF  GOVERN- 
MENT, IN  RESPECT  TO  A  PAPER  CIRCULATION. 

I  have  already  remarked,  when  treating  of  specie  cir- 
culation, that  coin  was  emplo}'ed  as  a  circulating  medi- 
um, not  in  consequence  of  the  act  of  a  government,  or 
of  the  stamp  which  it  bore,  but  simply  in  consequence 
of  its  adaptedness  to  be  employed  for  this  purpose,  and 
of  the  universal  desire  of  the  community  so  to  employ 
it ;  and  also,  that  the  whole  agency  of  the  government 
is  properly  limited  to  the  making  of  those  arrangements 
which  would  enable  it  to  accomplish  this  purpose  the 
most  successfully  ;  that  what  substance  a  community 
should  employ,  is  none  of  the  concern  of  a  government  , 
its  only  concern  being,  so  to  prepare  the  substance  em- 
ployed, that  it  may  be  used  with  the  greatest  common 
advantage. 

Now,  the  same  remarks  manifestly  apply  to  whatever 
may  be  used  as  a  circulating  medium,  whether  it  be  gold 
and  silver,  or  paper.     Hence, 

1 .  A  government  has  no  right  to  interfere  with  the 
original  question,  what  shall  the  currency  be  ;  this  may 
be  safely  left  to  the  decision  of  the  public  itself.  If  the 
24 


•278  AGENCY    OF    GOVERNMENT 

people  choose  to  use  a  mixed,  instead  of  a  metallic  cur- 
rency, they  have  a  right  to  use  it ;  and  no  one,  either  m- 
(lividual  or  associated,  has  any  right  to  forbid  that  use. 
If  1  present  a  check  to  a  bank,  and  they  offer  me  in 
payment  either  specie  or  bills,  and  1  choose  to  take 
iheir  bills,  it  is  a  matter  wholly  of  my  own  concern.  1 
ask  permission  to  make  this  choice,  of  no  one  on  earth. 
If  I  have  a  thousand  dollars  to  pay  in  New  Orleans,  and 
I  choose  to  take  the  bill  or  the  draft  of  a  bank,  and  send 
this  in  payment  instead  of  the  thousand  dollars  in  silver, 
and  my  creditor  receive  it  in  payment,  if  both  he  and  1 
are  satisfied,  I  see  not  that  any  one  has  a  right  to  in- 
terfere. 

2.  But,  although  a  community  may  choose  a  mixed, 
instead  of  a  metallic  currency,  and  although  they  have  a 
right  to  choose  it  ;  neither  any  community,  nor  any  in- 
dividual of  a  community,  chooses  eitjier  a  worthless  or  a 
fluctuating  currency.  While,  therefore,  a  government 
has  no  right  to  enact,  that  a  currency  shall  be  any  tiling 
else  than  the  people  wish  it  to  be,  they  have  a  right  to 
take  all  proper  means  to  make  it  such  as  the  people  wish 
it  to  be.     Hence, 

1.  They  have  a  right  to  take  such  means  as  will  give 
all  reasonable  security  to  a  mixed  currency.  These 
means  Jiave  respect,  in  general,  to  the  liability  of  direc- 
tors and  stockholders  to  redeem  their  bills.  In  what 
manner  this  security  can  be  best  effected,  it  must  be  left 
to  practical  men  to  decide.  In  some  cases,  all  the 
property  of  all  the  stockholders  is  rendered  liable  for 
the  debts  of  the  bank.  This  would  commonly  be  a  per- 
fect guarantee.  In  other  cases,  I  beheve,  the  property 
only  of  the  directors  is  held  liable.  In  what  way  soever 
security  can  be  best  and  most  equitably  effected,  I  thir  k 
a  government  has  an  undoubted  right  to  effect  it. 

2.  \  government  has  a  right  to  take  all  reasonable 
means  to  diminish  the  fluctuation  of  a  paper  currency. 
We  have  seen  that,  inasmuch  as  the  banks  promise  to 
redeem  their  bills  in  specie,  the  amount  of  papej  which 
they  may  safely  issue  must  always  depend  upon  the 
amount  of   specie   in  a  country.     Fluctuations  in  the 


AGENCY    OF    GOVERNMENT.  2\4 

amount  of  paper  must  follow  fluctuation  in  tlie  amount 
of  specie.  This  fluctuation  will  always  be  lets,  when 
the  proportion  of  specie  to  paper  is  great,  and  vice  versa. 
One  method,  therefore,  of  preventing  this  evil,  is,  so  to 
construct  the  currency,  that  the  proportion  of  specie  to 
paper  shall  be  too  great  to  be  affected  by  any  thing  but 
large  and  long  continued  exporlations  of  the  pre«uous 
metals.  This  result  may  be  in  part  effected  by  the  pro- 
hibition of  the  issue  of  small  bills.  This  will,  by  ne- 
cessity, place  in  the  hands  of  every  individual,  specie 
for  every  amount  which  he  may  hold  of  less  value  than 
the  lowest  note  issued.  Were  no  bank  in  this  country 
to  issue  notes  of  a  less  denomination  than  five  or  ten 
dollars,  most  of  the  sums  held  by  individuals,  in  notes 
of  one,  two,  and  three  dollars,  would  be  in  silver.  If 
every  individual  of  the  twelve  millions  in  the  United 
Slates,  possessed  two  dollars  more  in  specie  than  at 
present,  this  would  amount  to  twenty-four  millions  more 
of  specie  than  we  now  possess.  This  would,  of  itself, 
be  sufiicient  to  prevent  the  evil  arising  from  any  ordinary 
fluctuation. 

In  addition  to  this,  I  suppose  that  an  exact  account 
should  be  kept,  and  at  short  periods  made  public,  of  the 
amount  of  specie  imported  and  exported.  This  would 
give  to  the  banks,  timely  notice  of  the  danger,  and,  at 
the  first  intimation  of  excessive  issues,  they  might  cur- 
tail their  discounts,  in  season  to  avert  the  evil  befoie  it 
became  excessive  and  remediless. 

3.  While  we  deny  the  authority  of  legislative  inter- 
ference to  oppress  banks,  we  equally  deny  its  authority 
to  protect  them  against  the  consequences  of  their  own 
misconduct.  A  bank  promises  to  redeem  its  notes  in 
specie ;  a  legislature  has  no  more  right  to  invalidate  this 
obligation  than  to  invalidate  any  other.  If  an  individual 
fail  to  discharge  his  debts,  all  his  property  is  liable  to 
satisfy  the  demands  of  his  creditor.  If  a  joint  stock 
l)ank  fail,  only  the  amount  of  its  contributed  capital  is 
liable.  The  reason  is,  therefore,  stronger  why  the  latter 
should  be  amenable  to  the  common  law  of  debtor  and 
creditor  than  the  former.* 


280  A6ENCT    OF    GOVERNMENT. 

So  far  as  I  can  discover,  the  power  of  a  goviMnmenl 
over  a  paper  currency,  is  conferred  solely  for  the  ac- 
complishment of  these  two  objects  ;  and,  of  course,  :t 
IS  restricted  to  the  accomplishment  of  these  two  objects. 
A  government  has  no  right  to  interfere  with  it  for  any 
othei  purpose.  It  has,  for  instance,  no  right  to  interfere 
with  the  currency,  because  the  people  import  too  much, 
or  because  they  import  too  little  ;  because  they  buy  too 
much  land,  or  because  they  buy  too  little  land  ;  because 
'hey  over-trade,  or  because  they  under-trade.  Its  pow- 
er was  conferred  for  no  such  purpose,  and  to  use  it  for 
such  purpose  is  usurpation. 

But  other  grounds  for  legislative  interference  with 
banking  institutions  are  assumed,  which,  if  correctly  as- 
sumed, are  of  a  very  extraordinary  tendency.  Some  of 
►hese,  it  may  be  proper  for  us  briefly  to  consider.  For 
instance,  it  is  said,  that  banks  are  the  creatures  of  the 
legislature  ;  and  that  bank  directors  are  the  agents  of  the 
legislature  ;  and,  therefore,  that  a  legislature  may  right- 
fully exercise  over  them  any  authority  which  it  chooses  ; 
and  may  impose  upon  them  such  laws  as  it  sees  fit.  Such 
an  assumption  as  <his,  deserves  at  least  a  passing  notice. 

1.  It  is  asserted,  that  a  bank  is  the  creature  of  the 
legislature;  and,  therefore,  that  a  legislature  may  right- 
fully impose  upon  its  creature  such  laws,  and  subject  it 
to  such  jurisdiction,  as  it  pleases. 

The  assertion  is  somewhat  figurative.  What  is  meant, 
when  it  is  said  that  a  bank  is  a  creature  of  the  legisla- 
ture 9  In  what  does  a  banking  company  differ  from  a 
hanking  individual?  The  only  difference,  that  I  can 
'liicover,  is,  that  one  ii  incorporated  by  a  legislative  act. 
the  other  is  not. 

What,  then,  is  an  act  of  incorporation  9  It  is  merely 
a  power  granted  by  a  legislature,  to  several  individuals, 
to  do,  as  a  society.,  some  innocent  act,  which  they  may 
thus  do  more  conveniently,  but  which  any  one  of  them 
mighty  if  he  saw  fit,  do  without  any  act  of  the  legisla- 
ture. I  say,  some  innocent  act,  for  what  is  not  innocent, 
should  be  allowed  neither  to  individuals  nor  to  societies 

The  necessity  of  such  a  provision  is  manifest.     Many 


LEGISLATIVE    POWER    OVER    BANKS.  281 

innocent  purposes  can  be  accomplished,  only  by  many 
persons  associated    together.       Such   are   purposes    of 
charity,  of  science,  of  internal   improvement,  and  many 
othtrs.     Without  corporate  powers,  persons  so  associ 
ated  could  neither  hold  property,  nor  enforce  any  regu 
lations  upon  each  other  ;  and,  besides,  without  them, 
they  could   not   be   known  in  law,  nor  could  a  credltoj 
have  any  claim  upon  the  property  which  they  might  hold 
Hence,  when  individuals  wish  to  be  associated  for  au) 
innocent  purpose,  they  may  claim  an  act  of  incorpora 
lion  as  a  right ;  and  it  is  necessary,  for  the  protection  ol 
the  community^  that  it  should  be  granted.     And  hence, 
from  both  of  these  considerations,  it  is  incumbent  upon 
a  legislature  to  grant  it.      The  simple  principle  involved 
is  this  :    Is  this  an  innocent  means  of  promoting  my  own 
happiness  ."*    If  it  be,  society  is  under  obligation  to  afibrd 
it  to  me. 

Sotnetimes,  the  corporate  power  is  conferred  by  a 
separate  act,  in  every  individual  case  ;  at  other  times, 
a  general  law  is  passed,  empowering  any  individuals  to 
become  a  corporate  body,  by  conforming  to  specified 
conditions.  Under  the  latter  case,  come  the  laws  of 
partnerships  in  general  ;  or,  more  particularly,  the  law 
of  limited  partnerships,  of  the  State  of  New  York.  By 
this  last  act,  any  number  of  individuals  may  unite  in 
business,  and  be  liable  in  no  greater  amount  than  they 
have  contributed  ;  that  is,  to  all  intents  and  purposes 
may  become  a  corporation,  by  complying  with  certain 
conditions.  Such  is  also  the  case  with  ecclesiastical 
corporations  in  that  State. 

Now,  in  what  manner  soever  this  is  done,  its  effect  is 
simply  this  :  It  gives  to  certain  persons  associated  to- 
gether, under  certain  circumstances,  the  power  to  ict, 
in  the  same  manner  as  an  individual  might  act,  and  places 
ihom  under  the  same  responsibilities  as  those  under 
which  an  individual  is  placed.  This  is  the  meaning  of 
au  act  of  incorporation.  And  to  make  heavy  charges, 
and  exact  bonuses  for  the  passing  oT  such  an  act,  is  un- 
just and  oppressive.  A  man  might  as  well  be  charged 
for  Oie  right  of  trial  by  jury. 
24* 


282  LEGISLATIVE    POWER    OVER    BANKS. 

This,  then,  is  the  meaning  of  an  act  of  incorporation, 
and  this  is  what  is  really  meant  by  the  figurative  and  mys- 
terious terms,  ^'^  a  creature  of  the  legislature. '^  If,  then, 
a  legislature  possess  unlimited  power  over  a  bank^  be* 
cause  it  has  received  an  act  of  incorporation,  it  possess- 
es the  came  unlimited  power  over  all  its  creatures ;  that 
is,  over  every  thing  that  is  incorporated.  If  the  power 
exist,  and  exist  for  this  reason,  it  exists  in  every  case  to 
cvhich  the  reason  applies.  Thus,  he  who  owns  a  manu- 
factory alone,  may  conduct  it  as  he  pleases,  and  buy  and 
sell  when  he  chooses  ;  subject  only  to  the  ordinary  laws 
of  the  land.  But,  if  ten  men  become  incorporated,  as 
a  manufacturing  company,  they  are  under  the  unlimited 
power  of  the  legislature  ;  and  the  legislature  has  an  un- 
controlled right  to  say  when,  and  where,  and  of  whom 
they  must  buy  ;  and  when,  where,  and  to  whom  they 
must  sell  ;  or  whether  they  may  buy  or  sell  at  all.  Or, 
again  ;  An  individual  has  the  right  to  worship  God  As  he 
pleases.  But,  [(several  individuals  wish  to  unite.togeih- 
er  in  the  worship  of  God,  and,  for  their  own  conven- 
ience, desire  to  be  incorporated  for  the  promotion  of 
this  object,  their  rights  of  conscience  cease  ;  and,  after 
they  have  erected  their  house  of  worship,  a  legislature 
may  shut  it  up,  command  them  to  worship  when  and  how 
it  pleases,  or  may  command  them  to  worship  Mahomet 
or  Juggernaut ;  and  all  this  is  no  oppression,  but  is  a 
matter  of  simple,  honest,  common-sense^  justice  ;  be- 
cause these  individuals  have,  for  their  own  convenience, 
and  for  the  security  of  others,  become  in  law  a  corpo- 
rate body  ! 

But  even  this  is  not  all.  Legislation  never  confers 
ny  right  whatever  ;  it  only  confirms  those  rights  which 
previously  existed.  A  legislative  act  can  confirm  me  in 
the  possession  of  a  house  which  is  my  own  property  ; 
but  it  can  give  me  no  right  to  take  possession  of  a  house 
which  is  the  property  of  my  neighbor.  In  the  case  of 
corporations,  the  same  principle  holds.  A  legislative 
act.  only  defines  and  establishes  for  several  individuals, 
a  right  which  they  prev'ously  possessed.  But  the  case 
is  the  same  with  almost  all  the  rest  of  our  possessions. 


LEGISLATIVE    tu«VER    OVER    BANKS.  283 

We  hold  them  under  laws  by  which  our  right  is  defined 
and  established.  So  that,  upon  this  principle,  every  man 
is  the  creature  of  the  legislature  ;  that  is,  a  legislature  is 
ihe  fountain  of  all  power,  the  creator  of  all  rights  and 
deals  out  to  its  creatures  and  vassals^  whatever  of  liberty 
or  of  possession  it  sees  fit  to  confer.  This  is,  surely,  a 
novel  doctrine  to  advance  in  the  audience  of  a  free  peo- 
ple ;  and  whenever  it  is  advanced,  the  time  has  mani- 
festly arrived,  for  a  people  which  intends  to  continm 
free,  to  turn  their  attention  to  the  consideration  of  fiist 
principles. 

The  simple  truth  in  the  case  must  be  at  once  appa- 
rent. An  act  of  incorporation,  has  no  other  effect,  per 
se,  than  to  place  a  society  under  the  same  protection  as 
individuals,  and  subject  it  to  the  same  responsibilities  as 
individuals  ;  that  is,  to  place  it  under  the  common  and 
universal  laws  of  the  land.  If,  together  with  this,  a 
corporation  enters  into  a  contract  with  the  legislature  to 
do  certain  acts,  this  is  another  affair,  and  is  subsequent 
to,  and  different  from,  the  act  of  incorporation.  By 
such  contracts,  both  parties  are  equally  holden.  But 
this  makes  the  corporation  no  more  a  creature  of  the 
legislature,  than  it  makes  the  legislature  a  creature  of  the 
corporation.  A  legislature  may  agree  with  a  contractor 
to  build  a  wall  ;  but  this  makes  the  builder  in  no  respect 
a  creature  of  the  legislature  ;  nor  does  it  give  them  pow- 
er over  him  in  any  other  respect,  than  to  oblige  him  to 
fulfil  his  contract,  acQprding  to  the  laws  of  the  land. 

The  only  valid  objection  that,  so  far  as  I  perceive,  can 
be  urged  against  these  considerations  is  this.  An  act  of 
incorporation  changes  the  responsibility  of  the  incorpo- 
rators. Without  such  act  all  their  property  would  be 
liable  for  the  debts  of  the  incorporation ;  with  it  the  por- 
tion which  they  have  contributed  alone  is  liable.  'I'hat 
there  is  weight  in  the  objection  I  readily  grant.  Il 
would,  however,  prevail  no  further  than  this.  It  would 
show,  either  that  no  such  incorporations  should  be  estab 
lished  ;  or,  that  the  legislature  establishing  them  was 
bound  to  enforce  such  regulations,  that  the  safety  of  the 
public  should  be  exposed  to  no  additional  jeopardy.     In 


284  LEGIbLATIVE    POWER    OVER    BANKS. 

this  conclusion  I  heartily  concur.  After  this  is  done,  it 
does  not  follow  from  the  objection  that  a  legislature  has 
auy  more  right  to  oppress  or  to  favor  a  bank,  than  to  op- 
press or  favor  an  individual. 

Rut  it  is  also  asserted,  that  bank  directors  are  the 
agents  of  the  government,  or  of  the  legislature,  and 
hence,  that  they  are  under  the  unlimited  control  of  the 
government,  which  is  the  principal.  The  reason  for 
this  assertion  is,  that  the  government  has  the  right  to 
control  the  circulating  medium  ;  that  paper  money  is  the 
circulating  medium  ;  that  bank  directors  issue  paper 
money  ;  and  that,  therefore,  they  are  under  the  control 
of  the  government. 

To  this,  it  may  be  replied  : 

1.  The  control  of  the  government  over  the  circulat- 
ing medium,  is  limited  in  degree  ;  and  even  within  this 
degree^  it  is  limited  by  the  object  for  which  it  may  bo 
exerted.  A  government  has  a  right  to  enact  such  laws 
as  may  ensure  the  payment  of  the  debts  of  a  bank,  as 
well  as  of  all  other  debts,  and  as  may  prevent  excessive 
fluctuation  in  the  circulating  medium  ;  that  is,  they  have 
a  right  to  take  care  that  the  circulating  medium  be  sound 
and  convenient^  but,  I  see  not  that  they  have  any  other 
right  over  it.  And  this  right  is  equally  limited,  whether 
the  circulating  medium  be  paper  or  money. 

2.  Suppose  bank  directors  to  issue  this  circulating 
medium,  and  that,  on  that  ground,  they  are  under  the 
control  of  a  legislature  ;  they  are  tljen  under  its  control 
only  within  the  limits,  and  for  the  purposes  above  speci- 
fied ;  that  is,  they  are  to  be  placed  under  the  general 
laws  for  the  regulation  of  the  circulating  medium.  To 
exert  any  other  power,  or  to  exert  a  power  for  any  other 
purpose,  is  tyranny. 

3.  Bui  let  us  inquire  in  what  sense  bank  directors  are 
agents  of  government.  The  government,  in  their  case, 
as  in  many  others,  requires,  and  has  a  right  to  require, 
that,  in  the  conduct  of  their  business,  they  shall  conform 
to  certain  principles,  made  necessary  for  the  good  of  the 
whole.  But  does  this  render  them  agents  of  the  gov- 
erDment  ?     He  who  sells  gunpowder,  is  obliged  to  sell 


LEGISLATIVE    POWER    OVER    BANKS.  285 

It   under  special  regulations  ;  but  is  he,  on  this  account, 
an    agent    of  government  ?     Every    man^  who  buys  or 
sells  at  all,  buys  or  sells  under  some  regulations  of  a  leg 
islature  ;  but  is  he,  on  this   account,   their  agent,    over 
whom  they  have  the  right  of  unlimited  control  ? 

But,  take  a  still  more  analogous  case.  Suppose  an 
individual,  or  a  mining  company,  to  obtain  from  rheir 
mines,  one  hundred  thousand  dollars  a  year.  This  they 
appropriate  to  the  business  of  loans.  They  have,  how 
ever  no  right  to  coin  it  themselves,  but  must  have  it 
coined  at  the  mint  ;  that  is,  if  they  be  a  company,  they 
must  be  incorporated,  in  order  to  carry  their  purposes 
into  effect ;  and  they  must  carry  them  into  effect,  sub- 
ject to  such  rules  as  the  good  of  the  whole  may  demand. 
But  does  this  render  them,  or  their  directors,  the  agents 
of  government  ?  or  does  this  give  to  the  government  any 
other  power,  than  that  which  it  exercises  over  any  other 
individual .' 

Suppose,  now,  several  individuals  have  obtained  one 
hundred  thousand  dollars,  in  any  other  way  than  by 
mining,  and  that  they  wish  to  employ  it  in  the  business 
of  loaning.  They  are  u^der  obligations  to  conform  to 
the  general  laws  made  for  the  regulation  of  the  cirt  ulat- 
ing  niedium,  but  this  is  all.  They  do  not,  in  this  man- 
ner, become  the  agents  of  government,  any  more  by 
loaning,  than  by  doing  any  thing  else.  And  suppose 
that  their  customers  prefer  to  borrow  paper,  instead  of 
metallic  money.  If  they  issue  paper,  they  are  under 
obligation  to  issue  it  in  obedience  to  the  laws  enacted 
for  the  purpose  of' insuring  its  goodness  and"  stability  ; 
bu  tney  are  not,  on  this  account,  the  agents  of  govern- 
ment, nor  has  the  government  any  more  power  over 
them  than  it  has  over  any  other  individuals.  It  seems 
to  me,  therefore,  that  the  second  assertion,  namely,  thai 
bank  directors  are  the  agents  of  the  government,  i.^ 
wholly  gratuitous. 

But  it  is  said,  that  the  banks  have  a  monopoly  of  this 
article  money  ;  and  that,  therefore,  they  are,  of  right, 
subject  to  particular  legislation.  To  this,  I  reply  ; 
who  creates  this  monopoly  .•'     Certainly  not  the  banks, 


286  LEGISLATIVE    POWER    OVER    BANKS. 

but  the  legislature  themselves.  If  the  legislature  refusb 
banking  privileges  to  those  who  deserve  them,  or  gram 
them  under  such  terms,  that  but  few  persons  can  accept 
of  them,  and  thus  diminish  the  amount  of  banking  capi- 
tal, and  render  it  inadequate  to  the  wants  of  the  commu- 
nity, they  are  the  authors  of  the  monopoly  ;  and  they 
may  not  plead  their  own  wrongs  as  an  excuse  for  injus- 
tice.* Were  they  to  oblige  a  shoe-maker  to  pay  ten 
thousand  dollars  for  the  privilege  of  exercising  his  profes- 
sion, and  then,  because  there  were  but  one  or  two  shoe- 
makers in  a  city,  undertake  to  regulate  his  business, 
interfere  with  his  concerns,  and  fleece  him  over  again, 
on  the  ground  that  he  possessed  a  monopoly,  we  should 
speak  very  mildly  of  such  legislation,  when  we  called  it 
oppression  and  tyranny.  He  would  very  naturally  say  : 
"  I  do  not  ask  you  for  your  monopoly.  It  is  all  of  your 
own  imposing.     It  is  a  creature  of  the  legislature.     Let 


*  The  fact,  no  less  notorious  than  disgraceful,  is,  that,  in  many  of 
our  States,  bank  charters  are  granted  or  denied  for  purely  political 
reasons.  They  are  reserved  as  the  reward  for  services  done  to  the 
dominant  party.  Hence,  one  half  of  the  community  at  once  is,  by  this 
policy,  excluded  from  the  privilege  of  employing  their  capital  in  this 
manner.  The  charters  thus  granted,  are  frequently  granted  not  to 
those  who  are  possessed  of  the  necessary  capital,  but  to  those  who 
have  promoted  an  election.  It  is  manifest  that  neither  activity  nor 
skill,  in  political  intrigue,  will  add  any  thing  to  the  value  of  a  bill,  or 
afford  any  guaranty  for  the  honest  management  of  a  bank.  If,  how- 
ever, as  is  frequently  the  case,  the  applicants  do  not  wish  to  hold  the 
shares  themselves,  they  sell  them  at  an  advance,  before  any  of  the 
capital  has  been  paid,  to  persons  of  the  other  party.  These  last, 
therefore,  are  obliged  to  pay  this  advance,  as  a  bonus  to  those  who 
have  obtained  the  charter ;  and  thus,  their  property  is  taxed  at  the 
outset,  to  reward  the  industrious  partisan.  This  advance,  by  its 
whole  amount,  reduces  the  value  of  banking  capital,  and  prevenbi 
men  from  so  investing  their  property.  In  this  manner,  the  monopoly 
is  created  ;  and  thus,  very  commonly,  aVe  spurious  banks  liroughl 
into  existence.  It  will  be  found,  I  believe,  in  the  greater  number  of 
instances  in  which  fraud  has  been  detected  in  the  management  of 
banks,  that  they  have  been  banks  which  have  been  decidedly  parti- 
san in  their  character.  The  evils  resulting  from  this  system  are, 
however,  all  charged  upon  banks  and  bank  directors.  No  one  thinks 
of  arraigning  the  legislature,  from  which  all  these  evils  truly  eman- 
ate. In  some  of  the  States,  banking  capital  is  taxed  so  heavily,  that 
it  will  not  yield  a  fair  profit  if  honestly  conducted.  Men  of  charac- 
ter and  capital,  therefore,  abandon  banking,  and  the  stock  fails  into 
the  hands  of  the  less  scrupulous. 


•     LEGISLATIVE    POWER    OVtR    BANKS.  287 

every  one  who  chooses,  make  shoes,  subject  only  to  th*? 
common  laws  of  the  land,  and  both  the  monopoly,  and 
your  reasons  for  interfering  with  me  in  consequence  of 
it,  will  cease  together."  And  the  case  is  the  same  with 
banks.  Let  all  banking  be  governed  by  principles 
which  shall  ensure  the  security  of  the  community,  and 
then  let  banks  be  multiplied  at  will.  If  they  yield  more? 
than  an  average  profit,  they  will  thus  be  increased  until 
their  profit  is  reduced  to  that  of  other  business.  If  they 
yield  less,  they  will  be  diminished,  until  they  merely 
supply  the  wants  of  the  community.  Thus,  the  monop- 
oly, and  the  reason  for  oppression  founded  on  it,  will 
terminate  together. 

I  have  pursued  this  subject  to  a  greater  extent  than  1 
should  otherwise  have  done,  were  it  not  that  a  very 
general  disposition  exists,  and  has  always  existed,  to  in- 
terfere with  the  rights  of  capital  ;  and  because  no  coun- 
try can  long  be  prosperous,  where  these  rights  are  not 
respected.  Men  too  frequently  assume,  that  capital, 
devoted  to  the  purposes  of  loaning,  is  owned  by  the 
rich;. that,  by  evertaxing  and  oppressing  it,  the  rich 
only  suffer  ;  and,  as  the  rich  are  always  the  minority, 
they  must  bear  it,  without  any  redress.  Now,  setting 
aside  the  equity  of  such  a  notion,  it  is  still  proper  to  re- 
mark, that  there  is  nothing  which  so  readily  eludes  the 
grasp  of  oppression,  as  capital  of  this  kind.  It  is,  of  all 
capital,  the  n  ost  easily  transferred.  If  oppressed,  it 
will  be  transferred  to  more  congenial  climates  ;  the  in- 
dustry of  the  country  from  which  it  has  been  removed, 
will  languish  ;  its  population  will  diminish  ;  and  the  ma- 
jority will  find,  too  late,  that  the  blow  which  was  aimeil 
at  the  mmority  has  recoiled  upon  themselves.  Thoro 
is  no  better  policy,  either  for  nations  or  for  indi^  iduals. 
than  strict  and  even-handed  justice. 

The  course  of  legislation  with  respect  to  banks,  has 
too  frequently  been  at  direct  variance  with  the  principles 
of  political  economy.  By  charging  excessive  bonuses 
for  charters,  and  imposing  excessive  taxes  upon  stocks, 
they  have  taught  banks  the  lesson  of  injustice.  While 
\hey  have  been  doing  this,  however,  they  have  generall) 


288  LEGISLATIVE    POWER    OVER    BANKS.        • 

been  willing  to  defend  banks  from  the  consequences  of 
suspension,  and  continue  their  charters  while  they  violate 
their  chartered  obligations.  The  language  of  this  con- 
duct, when  truly  expounded,  is  simply  this.  Let  lu 
fleece  you  and  you  may  fleece  the  public. 


BOOK    THIRD 


DISTRIBUTION. 


We  have  seen  that,  in  order  to  the  creation  of  v^lue, 
It  is  necessary  that  labor  be  united  to  capital.  In  some 
cases,  both  of  these  are  the  property  of  the  same  indi- 
vidual ;  that  is,  the  same  person  both  owns  the  capital 
and  performs  the  labor.  In  by  far  the  greater  number 
of  instances,  however,  they  are  the  properly  of  differeni 
individuals  that  is,  one  person  owns  the  capital,  and 
another  person  performs  the  labor.  As,  when  the  same 
person  owns  both  labor  and  capital,  the  whole  increase 
of  value  becomes  his  exclusive  property  ;  so,  when 
these  belong  to  different  individuals,  the  value  belongs 
to  them  in  common  ;  that  is,  a  share  of  it  is  the  portion 
of  each. 

If,  then,  profit  arise  from  any  operation  in  industry, 
which  has  been  the  joint  result  of  the  labor  of  one  man, 
and  the  capital  of  another  man,  it  is  a  matter  of  some 
consequence  to  ascertain  the  principles,  on  which  the 
division  of  this  profit,  or  the  distribution.,  shall  he  ef- 
fected. And,  besides,  in  every  important  operation,  a 
great  variety  of  laborers  is,  of  necessity,  employed  ;  and 
of  these  laborers,  the  skill  and  talents  are  very  dissimi- 
lar. To  these  different  persons,  very  different  piopor- 
tions  of  the  profit,  equitably  belong.  And,  also,  the 
value  of  the  capital  tiius  employed,  may  be  differeni  at 
different  times,  and  in  different  occupations.  Hence, 
there  will  arise  a  difference  in  the  proportion  of  profit 
25 


390  DISTRIBUTION. 

which  shall,  at  diflerent  times,  be  assigned  to  a  givei. 
amount  of  capital.  And,  if  it  be  said,  that  tlie  remun- 
eration in  these  cases  is  always  arranged  among  men  by 
mutual  consent  ;  it  may  be  still  important  to  ascertain 
the  principles  on  which  this  mutual  consent  is  founded. 
This  book  would,  therefore,  naturally  be  divided  into 
two  parts  :  First,  fVages,  or  the  price  of  labor  ;  and, 
Secondly,  Interest^  or  the  price  of  capital.  But,  inas- 
much as  Land  is  a  fonn  of  capital,  in  some  measure 
peculiar,  it  may  be  more  convenient  to  consider  it  sepa- 
rately. Wfe  shall,  therefore,  divide  the  present  book 
into  three  chapters. 

I.  Wages,  or  the  price  of  Labor. 

II.  Interest,  or  the  price  of  Money. 
Ill    Rent,  or  the  price  of  Land. 


CHAPTER  FIRST. 

OF  WAGES,  OR  THE  PRICE    OF  LABOR. 

In  this  chapter,  I  shall  consider.  Is  .  The  general 
principles  of  wages;  and,  2dly.  The  special  ctrcum- 
ttances,  by  which  those  principles  are  modified. 


SECTION  I. 

THE  GENERAL  PRINCIPLES  OP  WAGES. 

The  price  of  any  thing,  is  its  exchangeable  valve,  ex- 
pressed in  the  form  of  money. 

Exchangeable  value,  is  cost,  plus  the  effect  of  supply 
and  demand. 

In  order,  the:t;fore,  to  understand  the  exchangeable 
value  of  labor,  we  must  consider,  1st.  Its  cost ;  and,  2dly. 
The  effect  of  supply  and  demand  upon  it. 

1 .    Of  the  Cost  of  Labor. 

Labor  may  be  divided  into  two  kinds :  1st.  Simple 
labor,  or  that  which  is  unconnected  with  previously  ac- 
quired skill  ;  and,  2dly.  Educated  labor,  or  that  in 
which  industry  is  combined  with  the  results  of  previous 
education. 

First.      Of  simple  labor. 

In  order  to   produce  this,  all  that  is  necessary  is  mus 
cular  strength,   resulting  from  a  properly  formed  body, 
and  a  sound  mind,  in  ordinary  health. 

But,  in  order  to  the  production  of  health  and  musculai 
strength,  it  is  necessary  that  the  human  being  be  suppli- 
ed with  food,  clothing,  shelter,  and,  at  times,  with  medi- 
cine and  n>€dical  attendance.      If  a  man  have  nothing  to 


292  GENERAL    PRINCIPLES    OF    WAGES. 

eat  10  day,  he  cannot  labor  to-morrow.  If,  for  a  few 
days,  he  be  deprived  of  food,  he  will  inevitably  die.  Ii 
his  food  be  insufficient  in  quantity,  or  of  improper  quali* 
ity,  his  strength  will  diminish,  and,  of  course,  the  mus- 
cular efforts,  of  which  he  would  be  otherwise  capable, 
will  be  decreased.  If  this  be  continued  but  for  a  very 
short  time  he  will  become  sick,  and  thus  lose  the  power 
•of  laboring  altogether.  If  he  be  not  relieved,  he  will 
die.  Hence  we  see,  that  there  is  a  natural  minimum  of 
the  cost  of  labor.  The  least  cost,  is  that  which  is  suffi- 
cient to  give  the  laborer  all  the  necessaries  of  life.  If 
we  give  less,  we  not  only  diminish  the  power  of  labor, 
but,  in  a  short  time,  take  it  away  altogether.  Hence, 
the  minimum  price  of  wages,  does  not  depend  upon  the 
will  of  employers,  but  upon  those  physiological  laws 
which  regulate  the  existence  of  man. 

2.  But,  this  is  not  all.  Man  is  short-lived.  The  spe- 
cies is  kept  in  existence  by  succession.  Unless  chil- 
dren* be  reared,  the  race  would  soon  become  extinct. 
And  children  are,  for  several  years,  not  only  unable  to 
earn  any  thing  towards  tlieir  own  support,  but  they  also 
require  a  large  portion  of  the  time  and  labor  of  the 
parent.  A  mother,  who  has  the  care  of  several  chil- 
dren, and  who  also  provides  for  the  domestic  wants  of 
her  family,  is  rarely  capable  of  much  additional  labor. 
Hence,  in  order  to  keep  the  number  of  laborers  the  same^ 
in  any  particular  country,  it  is  necessary  that  the  parent 
or  parents  receive  sufficient  wages,  not  only  to  provide 
food,  clothing,  and  shelter  for  themselves,  but  also,  for 
at  least  two  children,  until  the  children  are  able  to  sup- 
port themselves.  • 

3.  But,  this  is  not  all.  The  life  of  man  is  often  pro- 
longed beyond  the  period  of  active  labor.  In  old  age,  a 
man  is  either  utterly  disqualified  for  labor,  or  else  his  la- 
bor is  insufficient  to  support  him.  Hence,  he  must  either 
ho.  supported  by  his  children,  or  else  he  must,  when  in 
full  strength,  have  accumulated  sufficient  property  to 
support  him  in  his  decrepitude.  Hence,  the  wages  of 
labor  must  be  sufficient,  not  only  to  support  the  laborer, 
tnd  ut  least  two  children,  but  also  to  provide  for,  or  to 


GENERAL    PRINCIPLES  OF    WAGES.  293 

sustain  him,  iii  old  age,   when  the  power  of  labor  is  ex- 
hausted. 

If  so  much  as  this  be  earned  by  the  laborer,  the  pop- 
ulation of  a  country  may  remain  stationary.  If  two 
children  be  reared  by  every  human  pair,  these  will  sup- 
ply, but  will  no  more  than  supply,  the  ravages  of  death 
This,  therefore,  is  manifestly  the  lowest  price  of  labor. 
If  wages  do  not  equal  the  amount  necessary  for  this  re- 
sult, men  will  become  sick  and  will  die  ;  a  less  propor- 
tion of  children  than  this  will  be  reared  ;  and  population 
will  diminish.  The  lowest  price  at  which  the  labor  of 
any  animal  can  be  procured,  is  the  cost  of  rearing  him, 
and  of  maintaining  him  in  health  and  vigor. 

But,  it  is  the  fact,  that  the  natural  rate  of  the  produc- 
tiveness of  the  human  species  is  more  rapid  than  that  of 
two  children  to  two  parents.  In  favorable  circumstan- 
ces, two  parents  frequently  rear  six,  eight  or  ten  chil- 
dren. The  number  of  children  who  are  born,  does  not 
depend  upon  the  circumstances  of  the  parents.  More 
children  are  commonly  born  to  the  poor,  than  to  the 
rich.  The  rich  are  often  childless  ;  the  poor  very  rare- 
ly. But,  suppose  that  the  laborer  receive  only  sufB 
cient  wages  to  enable  him  to  support  himself  and  wife 
and  two  children  ;  and  that  his  family  amount  to  six  oi 
eight  human  beings,  it  is  manifest  that  some  of  them 
must  perish.  The  food  of  two,  will  not  sustain  six  or 
eight.  The  athers  must  starve,  or,  in  some  way  or 
other,  die  of  want.  The  manner  in  which  this  occurs, 
it  is  painful  to  contemplate  ;  though,  in  i>:ost  of  the  older 
countries,  it  is  frequently  seen.  The  pressure,  in  fuch 
a  case,  must  fall  upon  either  the  parent  or  the  child,  and 
parental  affection  generally  decides  upon  which  it  shall 
Call  first.  When  parental  afTection  is  strong,  the  parent 
denies  himself  the  necessaries  of  life,  in  order  to  support 
his  children,  until  his  constitution,  worn  down  by  im- 
proper and  insufHcient  food,  sinks  beneath  the  burden, 
and  he  dies  in  middle  age,  leaving  his  children  helpless. 
When  the  parental  feeling  is  less  acute,  the  sufTering 
falls  directly  upon  the  children.  Their  food  being  scan- 
ty and  unhealthy,  but  few  survive  early  infancy  ;  and 
25* 


294  NATURAL  COST  OF  LABOR. 

those  who  do  survive  it,  grow  up  feeble  and  Tiuhealihy 
A  human  infant  is  a  tender  plant,  easily  cut  down,  and 
liable  to  frequent  diseases.  Measles,  whooping-cough, 
croup,  teething,  acute  and  chronic  complaints  of  tho 
lungs,  head,  and  abdominal  viscera,  require  assiduous  at- 
tention, warm  clothing,  and  suitable  food  for  the  pa- 
tient, 01  else  its  chance  of  living  is  very  small.  When 
children,  ill-fed,  ill-clothed,  and  without  medicuie  and 
medical  attendance,  are  attacked  by  these  diseases,  they 
die  by  thousands.  When  a  portion  of  a  family  is  thus 
removed  by  death,  a  larger  portion  of  the  necessaries  of 
life  remains  for  those  who  survive  ;  and,  thus,  their 
chance  of  life  is  increased.  Thus,  out  of  a  very  great 
number  of  births,  frequently,  but  two  or  three  children 
are  reared.  And  this  view  of  the  subject  is  abundantly 
•supported  by  facts.  Adam  Sn)ith  informs  us,  that  it  is 
no  uncommon  thing  to  see  a  woman,  in  the  Highlands  of 
Scotland,  who  has  borne  twenty  children,  of  whom  not 
more  than  two  have  arrived  at  adult  years.  The  same 
author  adds,  that  although  the  children  born  in  military 
barracks  are  numerous  and  apparently  healthy,  yet  offi- 
cers have  informed  him,  that  rarely  enough  of  them  are 
reared,  to  supply  the  regiments  with  drummers  and  fifers. 

Now,  we  can  scarcely  suppose  that  to  be  the  condition 
of  man  which  his  Creator  intended,  in  which  so  laarge 
number  perish  in  infancy,  from  suffering,  from  hardship, 
and  from  want.  Hence,  I  suppose  the  natural  cost  of  la- 
bor, or  that  cost  which  corresponds  whh  the  proper  con- 
dition of  man,  would  be  that  which  allows  of  the  rearing  of 
such  a  number  of  children  as  naturally  falls  to  the  lot  of 
ihe  human  race.  This,  however,  pre-supposes  the  labor- 
eis  to  be  industrious,  virtuous,  and  frugal.  If  they  be  im- 
provident, indolent,  intemperate,  and  profligate,  and  thus 
either  do  not  earn  a  competency,  or  else,  having  earned 
it,  squander  it  in  vice,  the  fault  lies,  not  in  their  wages, 
but  in  themselves.  Of  course,  the  correction  must  come, 
not  from  a  change  in  wages,  but  from  a  change  in  habits. 

It  is,  however,  here  to  be  remarked,  that  what  is 
necessary  to  the  sustentation  and  comfort  of  a  human 
being,  differs  greatly  in  different  climates.     In  northern 


NATURAL  COST  OF  LABOR.  295 

latitudes,  human  beings  seem  to  need  a  larger  portion  of 
animal  food,  in  order  to  endure  labor.  The  Esquimaux 
live  upon  animal  food  entirely,  and  Sir  E.  Parry  informs 
us,  that,  while  wintering  at  the  north  pole,  the  appetite 
of  both  his  officers  and  men  was  much  stronger  than 
usual,  not  only  for  animal  food,  but  for  animal  food  of 
the  richest  and  most  nutritious  description.  And  as  an' 
imal  is  more  expensive  than  vegetable  food,  the  north- 
ern laborer,  on  this  account,  is  more  expensive  than  the 
southern  Again  :  In  cold  climates,  clothing  is  much 
more  expensive.  A  laborer  must  provide  both  winter 
and  summer  clothing  ;  he  must  protect  himself  from  the 
cold  and  wet,  or  he  will  sicken  and  die.  In  cold  cli- 
mates, much  greater  expense  is  incurred,  in  the  erection 
of  houses.  A  comfortable  house,  in  a  northern  climate, 
costs  the  labor  of  several  men  for  several  weeks,  and  of 
some  men  of  considerable  skill.  In  India,  a  day  or  two 
are  sufficient  to  erect  a  bamboo-house,  which,  in  that 
climate,  answers  tolerably  well  for  the  purposes  of  a 
habitation.  And,  besides  this,  in  a  cold  climate,  fuel, 
which  must  be  used  for  from  three  to  nine  months  in  the 
y^ear,  is  a  very  great  item  in  the  bill  of  annual  exponse. 
In  warm  countries,  fuel  is  used  for  no  other  purpose  than 
that  of  cooking  ;  and  for  this  purpose,  there,  a  very 
small  quantity  suffices. 

These  circumstances  are  sufficient  to  account,  in  pan, 
for  the  different  prices  of  labor,  in  southern  India,  and 
in  the  northern  parts  of  Europe,  and  of  the  United 
Slates.  Laborers  in  Batavia  are  hired  for  four  cents  a 
day  ;  and,  in  India,  I  believe,  they  are  hired  for  a  less 
sum.  This  would  scarcely  pay  for  the  fuel,  with  which 
the  meals  of  a  northern  laborer  are  cooked. 

It  would  seem,  at  first  view,  from  these  facts,  thai 
laborers  in  southern  latitudes  would  have  a  great  advan 
tage  over  those  at  the  north,  and  must,  of  necessity,  un 
dersell  them  in  every  thing.  But  such  seems  not  to  be 
the  case.  The  enervating  nature  of  the  climate,  unfits 
them  for  labor  ;  and  indisposes  them  to  the  putting  fortii 
of  intellectual  skill.  Hence  it  is,  that  this  labor  is  mere 
feeble  muscular  force,  accompanied  by  scarcely  any  of 


296  NATURAL  COST  OF  LABOR. 

the  advantages  derived  from  natural  agents.  Tne  rigors 
of  a  northern  latitude  compel  men  to  invention,  and  in- 
vigorate them  for  continued  effort.  Hence,  although  a 
northern  laborer  receives  one  dollar,  or  one  dollar  and 
fifty  cents  per  day,  and  the  Hindoo  receives  only  four 
cents,  yet  the  former  is,  in  fact,  the  cheaper  laborer  ; 
that  is,  it  is  the  most  economical  to  employ  him.  And 
the  evidence  of  this  is  seen  in  the  fact,  that  raw  cotton 
is,  at  present,  carried  from  India,  manufactured  in  Great 
Britain,  and  then  carried  back  to  India,  and  sold  cheap- 
er than  it  can  be  made  in  India  by  the  native  workmen. 

Secondly.  I  have,  thus  far,  treated  only  of  the  cost 
of  simple  labor  ;  that  is,  of  labor  with  which  no  such  skill 
IS  united,  as  requires  a  previous  education. 

But,  this  is  only  a  part  of  the  labor  which  is  employed 
by  man.  A  large  portion  of  it,  requires  special  and 
peculiar  training.  This,  of  course,  adds  to  its  cost. 
Suppose,  as  I  have  already  stated,  that  the  natural  price 
of  simple  labor  were  merely  sufficient  to  sustain  a  family, 
consisting  of  the  ordinary  number  of  persons.  A  man 
would,  therefore,  by  labor,  without  any  education,  under 
such  circumstances,  earn  this  amount.  But,  if  another 
labored  for  the  same  number  of  hours,  but  labored  at  an 
operation  which  he  could  not  learn  to  perform,  without 
spending  six  or  seven  years  in  acquiring  an  education,  it 
is  manifest  that  the  second  would  be  entitled  to  addition- 
al wages.  Thus,  suppose  the  laborer  must  spend  sever, 
years  in  acquiring  a  knowledge  of  his  trade.  During 
this  time  he  is  earning  nothing.  Now  his  wages,  at  com- 
pound interest,  if  he  had  been  at  profitable  labor,  would 
amount  to  a  considerable  sum,  specially  if  they  had  been 
invested  in  capital,  which  nnght  have  been  united  with 
his  own  labor.  He  is  entitled,  therefore,  to  such  an 
addition  to  his  wages,  as  would  pay  the  interest  upon 
this  amount.  Besides,  in  many  cases,  the  learner  not 
only  earns  nothing,  but  is  obliged  to  feed  and  cloth 
himself.  This  amount  is  to  be  added  to  the  capit.-il 
which  he  has  expended,  and  for  which  his  wages  should 
pay  the  interest.  Nor  is  this  all.  The  learner  is  fre- 
quently   obliged    to    pay    a    large    sum  for    instruction. 


Natural  cost  of  labor.        297 

This,  also,  is  to, be  added  to  his  investment,  for  which 
he  is  to  be  paid  when  we  employ  him.  Thus,  in  the 
learned  professions,  a  student  is  obliged,  commonly,  to 
spend  two  or  three  years  in  preparing  for  college,  to 
spend  four  years  in  college,  and  ihree  years  in  professional 
studies,  before  he  ir  admitted  to  practice.  During  the 
whole  of  these  nine  or  ten  years,  in  which  he  earns  noth- 
ing, he  must  be  fed,  clothed,  and  furnished  with  book*, 
and  must  pay  a  very  considerable  sum  to  his  instructf.rs 
for  tuition.  He  must,  in  most  cases,  also  possess  the 
means  to  meet  all  these  expenses,  before  he  commences. 
Now,  had  he  used  such  a  sum  skilfully,  from  the  time  at 
which  he  commenced,  to  that  at  which  he  concluded  Lis 
studies,  it  would  have  amounted  to  a  small  competency. 
He  is,  therefore,  fairly  entitled,  in  addition  to  the  price 
of  simple  labor,  to  such  wages  as  would  pay  the  inter- 
est of  whatever  such  a  sum  would  have  amounted  to,  had 
it  been  used  with  ordinary  skill. 

Wages,  which,  in  addition  to  the  price  of  simple 
labor,  would  pay  the  interest  of  whatever  is  expended  in 
procuring  the  necessary  education,  would  hence  be  the 
lowest  cost  of  such  labor.  And,  it  is  manifest,  also, 
that  these  should  vary  with  the  cost  of  the  investment 
necessary  for  acquiring  the  skill.  Thus,  the  wages  of 
him  who  was  obliged  to  sustain  himself  while  a  learner 
should  be  higher  than  those  of  him,  who,  though  he  earn- 
ed nothing,  was  fed  and  clothed  by  his  teacher.  The 
wages  of  him  who  was  obliged  to  pay  for  his  tuition, 
should  be  higher  than  those  of  hini,  who,  though  he  fed 
and  lodged  himself,  received  his  tuition  for  his  sei  vices. 
And,  if  such  wages  be  not  generally  paid,  such  labor 
will  not  ordinarily  be  produced.  Parents  who  have  caj)- 
ital  to  bestow  upon  their  children,  are  generally  desirous 
of  investing  it  to  the  best  advantage.  If  the  capital 
necessary  to  furnish  a  professional  education,  will  not  im- 
prove the  condition  of  a  child,  the  parent  will  not  invest 
the  money  in  a  professional  education,  but  will  employ  it, 
for  the  advantage  of  his  child,  in  some  other  way.  In 
this  manner,  the  supply  of  such  labor  will  be  diminished, 
until  necessity  obliges  men  to  offer  greater  inducements 
to  produce  it. 


298  SUPPLY    AND    DEMAND    FOR    LABOR. 

II.  Of  the  supply  and  demand  for  s'ynple  and  educat- 
ed Labor. 

First.  Of  the  supply  of  Simple  Labor.  I  have  be* 
fore  stated,  that  the  number  of  children  born  does  not 
depend  either  upon  the  riches  or  the  poverty  of  the  par- 
ents ;  but  that  the  number  born,  is  generally  greater 
among  the  poor,  than  among  the  rich.  I  have  also 
stated,  however,  that  the  number  reared  does  de- 
pend, very  greatly,  upon  the  circumstances  of  the  par- 
ents. When  the  wages  of  parents  are  barely  sufficient 
to  rear  two  children,  but  two  will  be  reared  ;  the  rest 
will  die  in  infancy.  When  wages  will  allow  of  rearing 
four,  four  will,  on  an  average^  be  reared  ;  and  so  on, 
until  we  arrive  at  the  natural  limit  of  fecundity  of  the 
human  race,  supposing  the  habits  of  the  parents  to  be 
virtuous,  industrious,  and  frugal.  Now,  as  simple  labor 
requires  nothing  but  4iealthy  human  beings,  it  is  manifest 
that  the  supply  of  this  labor  will  be  in  proportion  to  the 
demand  ;  that  is,  if  wages  be  such  as  to  indicate  an  ac- 
tual demand  for  a  large  increase  of  labor,  a  large  in- 
crease of  labor  will  be  the  result.  If  wages  be  such  as 
to  demand  only  a  diminished  amount  of  labor,  a  dimin- 
ished number  of  laborers  will  be  reared.  And  this  re- 
sult will  take  place,  until,  on  the  one  hand,  it  reaches 
the  limit  of  the  natural  increase  of  the  human  race  ;  or 
until,  on  the  other  hand,  the  number  of  human  beings  be 
so  reduced  by  death  or  by  emigration,  that  it  can  be 
sustained  by  the  wages  which  industry  can  command. 

If  this  first  limit  be  reached;  that  is,  if  wages  be  so 
high  as  to  support  all  the  children  that  are  born,  and  yet 
there  be  a  want  of  laborers,  wages  will  rise  very  high; 
and  the  deficiency  will  generally  be  supplied  by  immi- 
gration. Laborers  from  less  favored  countries  will  then 
flow  in,  to  supply  the  demand.  The  overburdened 
population  of  an  older  country  will  be  drained  off,  and 
the  surplus  capital  of  a  new  country  will  be  profitably 
employed. 

2.   Such  is  the  case  with  simple  labor,  or  that  which 
is  produced  by  the  mere  multiplication  of  human  beings 
The  same  principles  apply,  in  substance,  to  that  sort  of 


SUPPLY    AND    DEMAND    FOR    LABOR.  290 

labor,  which  consists  of  industry,  directed  by  previously 
acquired  skill,  but  which  requires  no  special  natural  en- 
ilowment.  In  this  case,  as  has  been  remarked,  if  the 
investment  made  in  education  will  afford  sufficient  emol- 
ument, in  addition  to  that  obtained  by  simple  labor,  i) 
will  be  produced.  If  this  additional  emolument  be  in- 
sufficient, it  will  not  be  produced;  that  is,  men  will  noi 
be  educated  for  this  particulur  occupation;  or,  if  they 
have  been  educated  for  it,  they  will  leave  it.  and  devoir 
themselves  to  some  other  pursuit. 

3.  But,  it  frequently  happens,  that  not  only  an  educa- 
tion, but  also  peculiar  native  talent  is  necessary,  in  or- 
der to  arrive  at  eminence  in  a  particular  pursuit.  When 
this  is  the  case,  the  supply  is  limited  by  the  gift  of  the 
Cieator,  and  cannot  be  increased  by  the  agency  o« 
man.  No  pecuniary  emolument  could  create  the  talent 
of  a  Milton  or  a  Shakspeare,  a  Cicero  or  a  Demos- 
thenes, a  Watt  or  a  Fulton.  Hence,  the  demand  for 
such  talent  being  great,  and  the  supply  limited,  and  by 
hflman  effort  incapable  of  increase,  the  exchangeable 
value  of  its  productions  is  frequently  great.  The  emol- 
uments of  Sir  Walter  Scott  were  princely.  It  not  un- 
frequently  happens,  however,  that  this  sort  of  talent  is  in 
advance  of  its  age,  and  its  value  is  not  appreciated  un- 
til after  the  death  of  its  possessor.  Although,  however, 
demand  cannot  create  unusual  genius,  yet  it  is  the  fact, 
that,  whenever  the  demand  is  greatest  for  any  particular 
talent,  then  that  talent  is  most  likely  to  arise.  The  rea- 
son I  suppose  to  be,  that,  in  proportion  to  the  encour- 
agement which  it  receives,  the  less  is  the  liability  that 
any  portion  of  that  which  the  Creator  has  bestowed  will 
be  lost.  Military  talent,  which  is  commonly  held  in 
high  estimation,  seems  lo  be  of  very  frequent  occurrence. 
A  nation  has  rarely  any  real  need  for  it,  without  produc- 
ing, in  a  short  time,  as  great  an  amount  of  it  as  on  bo 
desired.  The  same  remarks  apply,  in  a  considerable 
degree,  to  the  talent  for  invention,  for  scientific  investi- 
gation, for  eloquence,  and  matiy  others. 

Secondly.  Of  demand  for  Labor.  We  have  al- 
rpady  divided  laiior  into  two  kinds,  viz  :   First,  SimpU 


300  SUPPLT    AND    DEMAND    FOR   LABOR. 

labor^  comprehending,  under  this  term,  that  which  th 
quires  only  that  skill  which  every  person  may  easily  ac- 
quire; and,  secondly,  that  which  requires  some  peculiai 
talent^  and  is  perfected  only  hy  long  and  expensive 
training.  We  shall  here,  as  above,  consider  these  sep- 
arately. 

I.  Of  Simple  Labor,  and  that  which  requires  only 
such  skill  as  may  be  easily  acquired  by  all. 

This  is  the  sort  of  labor  required  to  produce  the  ne- 
cessaries of  life;  that  is,  labor  in  the  several  departments 
of  operative  industry.  For  this  labor,  the  desire  is  in- 
cessant and  universal.  Every  one  in  the  community 
needs,  at  every  hour  of  his  life,  the  results  of  that  labor 
which  produces  food,  clothing,  fuel,  and  shelter.  Unless 
these  can  be  procured,  the  human*  being  will  die;  and, 
as  these  articles  perish  with  the  using,  the  demand  is 
not  only  imperative,  but  unremitting. 

Now,  such  being  the  fact,  he  who  possesses  capital, 
knows  that  if  he  can  transform  it  into  such  products,  he 
can  always  reasonably  anticipate  a  profit.  But  he  cjfn- 
not  transform  it  into  such  products,  without  labor. 
Hence,  as  incessant  and  imperative  as  is  the  demand  for 
the  necessaries  of  life,  so  incessant  and  imperative  must 
be  the  demand  of  the  capitalist  for  that  labor,  by  means  •■ 
of  which  alone  they  are  produced.  If  a  community 
need  clothing,  and  a  capitalist  have  all  the  means  for 
making  clothing;  and  want  nothing  but  workmen  to  ere 
ate  the  product;  just  in  proportion  to  the  demand  for 
clothing,  will  be  his  demand  for  the  workman,  by  whose 
agency  alone  this  demand  can  be  supplied,  and  his  cap- 
ital rendered  profitable. 

Such  being  the  fact,  there  must  always  be  a  demand 
for  such  labor;  hence,  when  there  is  any  capital,  such 
labor  will  always  bring  something.  The  rate  at  which 
it  will  be  paid  at  different  times,  and  in  different  coun- 
tries, is  next  to  be  considered. 

We  have  already  stated  that  wages  are  the  result  of  a 
partnership,  formed  between  the  laborer  and  the  capi- 
talist, in  which  the  one  receives  a  portion  of  the  value 
er^aied,  in  return  for  njs  labor;  and  tne  other  the  re- 


POPULATION    AND    WAGES.  501 

mainder,  in  return  for  the  use  of  his  capital.  Both  of 
these  parties  are  equally  necessary  to  each  oiher.  If 
the  laborer  could  not  procure  work,  or  could  not  ex- 
change his  labor  for  some  value  which  he  created,  he 
•mist  starve.  If  the  capitalist  could  not  create  value 
from  the  employment  of  his  capital,  he  must  starve  also. 
He  could  neither  eat,  nor  drink,  nor  wear  his  looms, 
spinning-jennies,  ships,  iron,  or  cotton.  Both,  there- 
fore, come  into  the  market  on  equal  terms;  each  needi 
the  product  of  the  other;  and,  under  these  circumstan- 
ces, they  will  each  receive  either  less  or  more,  ni  con- 
sequence of  the  conditions  under  which  the  exchange  is 
made. 

Every  capitalist  wishes  to  have  all  his  capital  united 
with  labor ;  since,  that  which  is  not  thus  united,  will  be 
useless  to  him  ;  nay,  it  will  generally  diminish  in  actual 
value.  On  the  other  hand,  in  a  given  state  of  the  arts, 
the  labor  of  a  single  man  can  be  applied  to  but  a  given 
amount  of  capital.  Hence,  the  number  of  laborers 
whom  any  single  capitalist  will  require,  will  be  in  pro- 
portion to  the  amount  of  his  capital.  If  a  capitalist  of 
ten  thousand  dollars  require  ten  laborers,  one  of  one 
hundred  thousand  dollars  will  require  one  hundred  labor- 
er:;. And  so,  in  general,  the  greater  the  amount  of 
capital  employed  in  a  country,  the  greater,  of  course 
will  be  the  number  of  laborers  employed. 

As  now,  every  capitalist  will  wish  to  employ  all  his 
capital,  if  the  number  of  laborers  be  insufficient  to  sup- 
ply the  demand,  there  will  be  a  competition  among  cap- 
italists, for  laborers,  and  they  will  offer  higher  wages; 
that  is,  rather  than  have  any  portion  of  their  capital  use- 
less, they  will  offer  a  larger  share  of  the  profits  to  the 
laborer.  The  first  class  of  workmen  will  be  all  em- 
ployed at  a  high  price,  and  a  portion  of  the  second  class 
will  be  raised  one  grade,  in  order  to  supply  the  demand 
The  second  class  will,  then,  be  still  more  insufficient  to 
supply  the  demand  for  their  description  of  labor,  and 
their  wages  will  rise,  and  the  increased  deficiency  be 
supplied  from  the  third  class.  And,  at  last,  those  who 
were  before  employed  only  at  simple  labor,  will  be 
26 


302  POPULATION    AND    tVAfiES. 

taught  and  employed  in  educated  labor;  and  thus  the 
whole  class  of  workmen  will  be  raised  one  grade  in  labor 
and  in  wages. 

And  the  reverse  will  take  place  in  the  opposite  case. 
►Suppose  the  number  of  laborers  be  too  great  to  be 
employed  by  the  existing  amount  of  capital.  A  capital- 
ist, whose  capital  will  occupy  but  one  hundred,  cannot 
employ  one  hundred  and  fifty  laborers.  Hence,  there 
will  be  a  competition  among  laborers  for  work.  After 
as  many  of  the  first  class  have  been  employed  as  are 
needed,  there  will  remain  a  portion  of  them  out  of  work. 
These  must  fall  into  the  second  class,  and  receive  t!M* 
second  rate  of  wages.  This  will  cause  an  excess  still 
greater  in  the  second  class;  their  wages  will  fall,  and  ;i 
greater  number  will  fall  into  the  third  class.  The  low- 
est class  will  thus  be  supplied  from  the  classes  above  it, 
and  it  must  betake  itself  to  simple  labor,  or  labor  of  the 
cheapest  kind.  While  many  of  those  whose  only  sup- 
port is  derived  fix)m  simple  labor,  must  be  out  of  em- 
ployment, either  wholly  or  in  part;  that  is,  the  whole 
class  of  laborers  will  fall  one  grade,  and  their  wages  will 
depreciate  in  proportion.  Hence,  we  see,  that,  at  any 
given  time  and  place,  the  demand  for  labor,  and  the 
wages  of  labor,  will  be  in  the  proportion  to  the  ratio  that 
the  active  capital  of  a  country  bears  to  the  number  of 
laborers  in  that  country. 

But  provision  has  been  made,  in  our  physical  consti- 
tution, for  the  rapid  increase  of  the  human  race.  It  is  ca- 
pable of  doubling,  once  in  twenty-five  years,  as  it  is  seen 
to  be  the  case  in  the  United  States.  And  provision  is 
also  made  for  the  rapid  accumulation  of  capital.  The 
earth,  every  year,  if  it  be  properly  tilled,  and  if  capital 
be  properly  employed,  produces  more  than  its  inhabit- 
ants consume.  This  surplus  may  be  turned  into  fixed 
capital,  and  may  thus  give  employment  to  a  larger  num- 
ber of  laborers.  Hence  the  average  rate  of  wages  in 
any  country  for  a  number  of  years  taken  together,  must 
depend  upon  the  ratio  which  the  annual  accumulation  of 
capital  in  any  country,  heirs  to  the  annual  increase  of 
human  beings.     If  wages  be  high,  and  capital  increase 


POPULATION    AND    WAGES.  303 

as  fast  as  the  human  species  increases,  wages  will  foi 
any  period  that  may  be  contemplated,  continue  as  they 
are  at  present.  If  wages  be  low,  and  capital  does  not 
increase  faster  than  the  human  race,  they  will  continue 
low.  If  the  increase  of  capital  be  more  rapid  than  the 
natural  increase  of  the  human  race,  wages,  however 
high,  will  rise,  until  they  be  so  high  thai  the  production 
can  yield  no  profit.  The  deficiency  would  then  be  sup- 
plied by  foreigners,  who  would  immigrate  to  the  more 
favored  country.  If  the  increase  of  capital  be  less 
rapid  than  that  of  the  human  race,  the  price  of  wages 
will  fall,  distress  in  the  working  classes  will  ensue,  and 
they  must  either  emigrate  or  starve. 

If  this  be  so,  it  will  be  evident  that  the  laws  regulat- 
ing wages  depend  upon  circumstances  beyond  the  power 
of  capitalists  or  laborers.  The  rich  cannot  leCuse  to 
employ  laborers  without  loss,  and  the  workman  cannot 
refuse  to  labor  without  loss.  And  the  competition 
which  naturally  exists,  in  a  free  country,  is  all  that  is 
necessary  to  bring  wages  to  their  proper  level  ;  that  is, 
to  all  that  can  be  reasonably  paid  for  them.  Hence 
combinations  among  capitalists  or  laborers  are  not  only 
useless,  but  expensive,  and  unjust.  They  attempt  to 
change  the  laws  by  which  remuneration  is  governed^ 
and  they  must,  by  consequence,  thus  be  useless.  The) 
expose  capital  and  labor  to  long  periods  of  idleness,  and 
thus  are  expensive.  They  assume  the  power  of  depriv 
ing  the  capitalist  of  his  right  to  employ  laborers,  and  the 
laborer  of  his  right  to  dispose  of  his  labor  to  whomso- 
ever and  on  what  terms  soever  he  pleases,  and  hence 
they  are  unjust.  And  combinations  of  this  kind  aie  as 
unjust  when  undertaken  by  the  rich  as  by  the  poor. 

Hence  we  see,  that  the  prosperity  of  a  nation  docs 
not  depend  simply  upon  the  absolute  amount  of  its  capi- 
tal, but  upon  the  ratio  which  its  capital  bears  to  its  pop- 
ulation, and  the  ratio  which  is  maintained  between  the 
increase  of  both.  If  the  increase  of  capital  be  so  rapid 
as  to  allow  the  simple  laborer  sufficient  wages  to  support 
and  rear  as  many  children  as,  under  ordinary  circum- 
stances, form  a  human  family,  there  will  be  no  distress 


304  POPULATION    AND    WAGES. 

in  any  class  ;  all  will  be  well  supported  ;  there  will  be 
no  beggars  from  necessity  ;  and  every  one  will  enjoy 
the  advantages  arising  from  his  skill  and  his  education 
Jf  the  increase  of  capital  be  more  rapid  than  this, 
every  one  will  have,  besides  support  and  maintenance, 
many  of  the  conveniences  of  life  ;  and  a  large  proportion 
will  be  continually  rising  from  a  lower  to  a  higher  grade 
of  employment.  When  the  increase  of  capital  is  less 
rapid  than  the  ordinary  increase  of  the  human  race,  there 
will  be,  in  the  lowest  class,  continual  distress  ;  children 
will  die  in  great  numbers  ;  the  average  duration  of  hu- 
man life  will  be  shortened  ;  and  many  persons  will  be 
sinking  from  the  higher  into  the  lower  grades  of  employ- 
ment and  comfort. 

The  former  seems  to  be  the  condition  of  this  coun- 
try. Here  distressing  poverty,  or  poverty  which  short- 
ens life,  except  it  arise  from  intemperance,  or  from  some 
form  of  vice  or  indolence,  is  very  rare.  The  common 
laborer,  if  industrious,  virtuous,  and  frugal,  may  not  only 
support  himself,  but,  in  a  few  years,  accumulate  a  valua- 
ble little  capital.  And  notwithstanding  the  great  immi- 
gration of  foreigners,  the  wages  of  labor  are  annually 
rising.  Hence,  it  is  evident,  that  the  increase  of  capital 
more  than  keeps  pace  with  the  natural  and  imported  in- 
crease of  the  human  race. 

In  Ireland,  the  case  is  reversed.  There,  the- lowest 
classes  are,  and  have  been  for  a  long  period,  in  the  most 
abject  poverty.  Multitudes  of  them  are  said  to  die, 
annually,  of  famine.  He  is  considered  in  tolerable 
circumstances,  who  is  able  to  furnish  his  family  with  a 
hovel,  with  one  full  meal  of  potatoes  a  day,  and  with  a 
sufficient  supply  of  straw  to  be  spread  upon  the  earthy 
floor  for  bedding.  The  reason  I  suppose  to  be,  that,  in 
addition  to  the  deplorable  ignorance  of  the  people,  the 
land  is  owned  in  England  ;  and  the  rents,  collected  by 
rapacious  underlings,  is  annually  carried  away  and  spent 
in  England,  instead  of  being  turned  into  fixed  capital  in 
Ireland.  Hence,  the  annual  increase  adds  but  little  to 
the  capital  of  the  country  ;  and  the  people  must  starve 
"it  emigrate. 


POPULATION    AND    WAGES.  306 

This  subject  illustrates  the  connexion  between  capital 
and  population.  Population  always  follows  capital.  It 
increases  as  capital  increases  ;  is  stationary  when  capital  )  \ 
is  stationary ;  and  decreases  when  capital  decreases.  / 
And  hence,  there  seems  no  need  of  any  other  means  to 
prevent  the  too  rapid  increase  of  population,  than  to  se- 
cure a  correspondent  increase  of  capital,  by  which  that 
population  may  be  supported. 

Several  conclusions  naturally  belong  to  this  part  of 
this  subject,  to  which  it  may  be  proper  in  this  place  to 
allude. 

1.  If  the  above  reasonings  be  correct,  we  see  the 
great  importance,  both  of  individual  and  national  frugali- 
ty. It  is,  by  many  persons,  supposed,  that  luxury  and 
expensiveness  in  individuals  are  specially  useful  to  the 
poor  ;  and  that  economy  and  frugality  are  injurious  to 
them.  We  see,  however,  that  nothing  could  be  more 
evidently  erroneous.  He  who  consumes  upon  horses, 
and  dogs,  and  equipage,  ten  thousand  dollars'  worth  of 
value,  is  annually  putting  out  of  existence  a  value, 
ivhich,  if  united  with  industry,  might  support  several 
families  in  comfort ;  and  he  is  thus  rendering  it  impossi 
ble,  that  so  many  can  be  supported.  He  who  saves 
this  sum  by  frugality,  and  invests  it  in  some  profitable 
enterprise,  employs  the  persons  whom  it  will  support  the  . 
first  year  ;  and,  by  so  doing,  is  enabled  to  support  a 
larger  number  the  next  year,  and  so  on  indefinitely. 
The  one  is  destroying,  forever,  a  fund  for  the  support 
of  industry  ;  the  other  is  annually  rendering  that  fund 
larger  and  more  productive. 

2.  The  same  is  true  of  nations.  The  annual  revenue 
(if  a  nation,  must  of  course  be  derived  from  the  annual 
levenues  of  the  people.  If  a  man,  this  year,  pa}  one 
htindred  dollars  in  taxes,  he  has  precisely  ninety  dollars 
(ess  to  unite  with  the  industry  of  the  next  year,  than  he 
would  have,  if  he  paid  only  ten  dollars.  And  thus,  if 
the  annual  expenditures  of  a  nation  be  fifty  millions, 
these  fifty  millions  are  jiist  so  much  abstracted  from  the 
fund  which  has  been  collected  during  that  year,  for  the 
purpose  of  supporting  the  addition  which  this  year  has 

26* 


306  POPULATION    AND    WAGES. 

made  to  the  number  of  the  human  race.  If  the  whole 
revenue  of  the  nation  were  barely  sufficient  to  employ 
and  support  the  annual  increase  of  its  inhabitants,  those 
who  would  have  been  supported  by  these  additional  fifty 
millions,  must  perish.  Such  is  the  natural  and  necessa- 
ry result  of  national  prodigality. 

I  do  not,  however,  by  any  means  intend  to  assert, 
that  taxes  are  unnecessary.  A  government  necessarily 
involves  expense.  And,  if  the  government  be  well  ad- 
ministered, no  mode  of  expenditure  yields  a  richer  or 
more  valuable  product  than  taxes.  What  1  have  to  say, 
is  merely  this  ;  that  while  all  the  expense  necessary  to 
good  government  should  be  met,  and  met  cheerfully  and 
liberally,  yet  expense  beyond  this  is  a  benefit  to  no  one  ; 
it  diminishes  the  comforts  of  all,  and  destroys  the  lives 
of  multitudes.  Hence,  we  see  the  evil  of  any  form  of 
government,  which,  by  necessity,  involves  great  and  un- 
necessary expenditure.  Hence,  also,  the  evil  of  laws 
of  entail,  and  of  all  other  arrangements  by  which  im- 
mense amounts  of  capital  are  accumulated  in  the  hands 
of  single  individuals,  or  of  families,  in  perpetuity.  In 
this  manner,  the  annual  productiveness  of  a  country  is 
greatly  decreased,  and,  in  consequence,  the  annual  reve- 
nue of  the  whole,  is  by  the  difference  lessened. 

3.,  Of  all  the  modes  of  national  expenditure,  the  most 
enormous  is  that  of  war.  In  the  first  place,  the  ex- 
pense of  the  munitions  of  war  is  overwhelming.  In  the 
next  place,  the  most  athletic  and  vigorous  laborers  must 
be  selected  for  slaughter.  Of  these  the  time  and  labor 
are  wholly  unproductive.  The  operations  of  industry, 
in  both  belligerent  nations,  are  thus  greatly  paralyzed. 
The  destruction  of  property,  in  the  district  through 
which  an  army  passes,  is  generally  very  great.  All  this 
must  be  taken  from  the  earnings  of  a  people ;  and  is  so 
much  capital  absolutely  destroyed,  from  which  multi- 
tudes might  have  been  reared,  and  have  lived  in  pros- 
perity. * 

•  To  illustrate  the  vast  expenditure  of  war,  1  nere  insert  an  esti- 
mate of  the  expenses  of  some  of  the  latest  war?.  I  do  not  vouch  foi 
its  entire  accuracy,  but,  I  presume,  it  will  be  found,  in  general,  cor 


fOrUIATION    AND    WAGES.  3C^ 

If  the  considerations  which  have  been  adduced  above 
be  carrect,  there  is  no  need  of  seeking  any  further  foi 
the  cause  of  that  distress  among  the  lower  classes,  of 
which  we  hear  so  frequently  in  Europe.  If  the  capital 
which  a  bountiful  Creator  has  provided  for  the  suste- 
nance of  man,  be  dissipated  in  wars,  his  creatures  must 
perish  for  the  want  of  it.  Nor  do  we  need  any  abstruse 
theories  of  population,  to  enable  us  to  ascertain  in  what 
nianner  this  excess  of  population  may  be  prevented. 
Let  nations  cultivate  the  arts  of  peace.  Let  them  re- 
duce the  unnecessary  expenses  of  governments.  Let 
them  abolish  those  restrictions  which  fetter  and  dispirit 
industry,  by  diminishing  the  inducements  to  labor.     Let 

rect.     It  is   from  one  of  the  publications  of  the  I'eace  Society,  and 
seems  to  be  made  up  from  authentic  documents. 

GREAT    BRITAIM 

War  expenses,  for  the  year  1815,      .        .        .  £54,317,767 

Interest  on  debt,  for  that  year 6,200,000 

£60,517,767 
Military  and  naval  expenses,  for  1818,  .        .        .        15,155,000 

Difference  of  the  two  years, 45,362,767 

Equal  to        .        .        .        .        •        $201,362,898 

FRANCa. 

Military  expenses  for  1809,        .  .        .        francs  656,500,000 

Contributions  on  foreign  nations,         ....        330,000,000 

Total, 986,500,000 

In  1817,  the  military  expense  was,      ....         228.000,000 

Expense  of  one  year's  war 758,500,000 

Equal  tf  ....  $142,218,750 

The  estimated  cost  to  Great   Britain,    of  twenty-two 

years'  war, £720,000  000 

Equal  to     .         - 1 3,2()0,000,00C 

War  expense  for  France,  for  same  period,  .         .         .     3,130,000,000 

Austria,  about         .         .  .        2,()00,000,i)00 

Three  years  war  of  the  United  States,  .        .        120,000,000 

8,450.000,000 
Expense  if  othei  Earopean  powers,        .        .        .        4,559,000,000 

13,000,000,000 

This  it  nothing  but  the  national  expense,  without  estimating  the 
Viodiffioas  and  incalculable  losses  to  individuals. 


300  POPULATION    AND    WAGES. 

them  foster  the  means  by  which  the  productiveness  of 
labor  may  be  increased,  and  the  annual  gifts  of  the  Cre- 
ator will  so  accun)ulate,  that  the  means  will  be  provided 
for  the  support  of  all  the  human  beings  that  are  annually 
brought  into  the  world.  As  soon  as  this  accumulation 
bears  a  suitable  ratio  to  the  number  of  inhabitants,  we 
shall  hear  no  more  of  the  evls  of  excess  of  population. 
ft  is  vain  to  throw  away  the  food  of  a  million  of  people 
in  a  single  day,  and  then  be  astonished  that  a  million  of 
people  are  starving  for  the  want  of  it. 

Hence  we  learn  the  economical  evils  of  every  form 
of  vice  ;  as,  for  instance,  of  intemperance.  The 
money  spent  in  intemperance,  is  so  much  absolute  waste 
of  capital.  This  is,  of  itself,  in  most  civilized  coun- 
tries, enormous.  But,  besides  this,  it  unfits  the  individ- 
ual for  labor  ;  it  is  the  author  of  numerous  diseases, 
both  in  parents  and  in  children.  It  is  the  cause  of  al- 
most all  the  crime  and  pauperism  in  the  community. 
All  these  together,  if  they  could  be  correctly  estimated, 
would  form  a  total  amount  which  would  seem  almost  in- 
credible ;  and  they  are  altogether  exclusive  of  that  loss 
of  social,  intellectual,  and  moral  happiness,  which  re- 
sults from  this  vice. 

To  sum  up  what  has  been  said.  We  see  that  the 
demand  for  the  labor  employed  in  the  production  of  the 
necessaries  of  life  ;  and,  of  course,  the  wages  of  labor, 
must  be  in  proportion  to  the  ratio  which  the  amount  of 
capital  in  any  given  community,  holds  to  the  number  of 
laborers  ;  and  to  the  ratio  which  the  accumulation  of 
capital  bears  to  the  increase  of  the  human  race.  And 
these  being  at  any  time  fixed,  wages  will  rise  or  fall,  as 
this  ratio  varies  If  capital  be  increasing  more  rapid!) 
I  ban  human  beings,  wages  will  rise.  If  it  be  not  in- 
creasing so  fast,  wages  will  fall.  And  if,  from  any  sud- 
den change  in  the  affairs  of  a  country,  this  ratio  be  sud- 
denly affected,  wages  will  be  affected  accordingly. 

Jt.  I  now  come  to  consider  that  sort  of  labor,  which 
requires  special  and  expensive  education,  and  some  pe- 
culiar natural  endowment  ;  such,  for  instance,  is  the 
labor  which  is  bestowed  upon  the  fine  arts,  and  which  is 
employed  in  some  of  the  professions. 


LABOR    IN    THE    FII^K    ARTS.  ^^09 

1.  Tht  desire  for  this  labor  varies  with  the  age  of  a 
society.  In  the  beginnings  of  a  nation,  when  every  one 
IS  interested  in  providing  the  means  of  subsistence,  there 
is  little  time  or  capital  to  spare  for  the  cultivation  of  a 
taste  for  |he  fine  arts.  And,  at  a  yet  more  advanced 
period,  when  wages  for  labor  are  universally  high,  and 
every  one  may  reasonably  cherish  the  hope  of  attaining 
to  independence,  the  love  of  gain  is  too  absorbing  a  pas- 
sion to  allow  of  the  development  of  any  habit  that  does 
not  conduce  to  pecuniary  acquisition.  It  is  only  in  the 
later  and  more  advanced  stages  of  society,  where  hered- 
itary fortunes  have  been  built  up,  and  where  accumulated 
property  gives  opportunity  for  leisure  and  refinement, 
that  much  desire  is  manifested  for  those  productions  of 
the  fine  arts,  which  are  considered  the  offspring  of  the 
rarest  and  most  highly  gifted  talent. 

2.  The  ability  to  gratify  this  desire,  depends  also 
upon  the  form  of  social  organization.  The  productions 
of  the  fine  arts  are  generally  very  costly.  Hence, 
where  property  is  nearly  equally  divided,  where  no  one 
is  poor,  though  no  one  may  be  exorbitantly  rich,  such 
productions  could  have  but  few  purchasers.  Whether 
wages  were  high  or  low,  whether  there  were  no  beggars 
or  whether  there  were  ten  thousand  beggars,  would  have 
no  effect  upon  the  probability  of  the  sale  of  a  statue, 
which  cost  one  hundred  thousand  dollars.  The  demand, 
is  of  necessity,  limited  to  the  wealthy  ;  and  that  form  of 
social  organization  which  is  most  favorable  to  the  accu- 
mulation of  large  estates,  and  to  the  retaining  of  them 
in  the  hands  of  single  individuals,  will  always  be  most 
favorable  to  the  cultivation  of  the  fine  arts.  In  this 
country,  where  we  have  few  beggars,  and  where,  but  for 
intemperance  and  vice,  we  should  have  none,  a  first-rate 
sculptor  or  painter  would  starve.  In  many  of  the  coun- 
tries of  Europe,  where  the  poor  are  j-equently  famisli- 
ing,  and  where  a  large  proportion  of  the  population  are 
beggars,  you  may  frequently  find,  in  the  gallery  of  a 
single  gentleman,  a  finer  collection  of  paintings,  than 
could  be  made  from  all  the  pictures  in  the  whole  United 
States.  Hence,  I  think  that  the  prospect  for  the  arts, 
in  this  cr«iitry,  is  by  no  means  encouraging. 


SIO  CAUSES    OF    DIFFERENCE    OF    WAGES. 


SECTION  II. 

OF  THE  SPECIAL  CIRCUMSTANCES  BY  WHICH,  IRRE^ 
SPECTIVELY  OF  THE  INFLUENCE  OF  CAPITAL,  THE 
WAGES    OF    LABOR    ARE    AFFECTED. 

In  the  preceding  section,  I  have  endeavored  to  show 
m  what  manner  wages,  or  the  price  of  labor,  are  affected 
by  capital.  The  general  principle  there  illustrated,  is, 
that  wages  will  be  high,  when  the  proportion  of  capital 
to  labor  is  great ;  and  low,  when  the  proportion  of  cap- 
ital to  labor  is  small  :  and  that  wages  will  be  rising  or 
falling,  as  this  proportion  of  capital  to  labor  is  increasing 
or  diminishing.  On  this  principle,  I  suppose  that  the 
difference  of  wages,  in  different  countries,  under  the 
same  physical  conditions,  may  be  explained. 

The  same  principle  may  be  carried  a  step  further. 
Whenever,  in  any  country,  capital  is  removed  from  one 
kind  of  employment  to  another,  the  wages,  in  that  form 
of  labor  to  which  capital  is  transferred,  will  be  raised. 
Thus,  if  a  people  find  it  for  their  interest  to  employ  their 
capital  in  manufactures,  instead  of  navigation,  the  wages 
of  manufacturers  will  rise,  and  those  of  sailors  will  fall. 
This  will  continue,  until  the  demand  for  manufacturing 
labor  is  supplied.  But,  when  the  current  is  once  set  in 
any  direction,  it  frequently  continues  to  move,  after  the 
force  which  was  originally  applied,  has  ceased.  Hence, 
it  will  frequently  happen,  that  a  change  of  this  sort  wil' 
abstract  from  navigation  too  large  a  number  of  labor 
ers,  so  that  there  will  not  be  a  sufficient  supply  to  meet 
even  the  diminished  demand.  In  this  case,  the  wages 
of  seamen  will  rise  again,  somewhat  above  the  proper 
average. 

Ikit,  supposing  all  these  circumstances  to  be  adjusted, 
•.here  will  yet  remain  others  of  a  different  kind,  to  affect 
the  wages  of  labor.  We  do  not  find  that  the  wages  of 
all  laborers  are  the  same,  whether  labor  be  high  or  low,- 
and  whether  the  productiveness  of  labor   be    great  or 


CAUSES    OF    DIFFERENCE    OF    WAGES.  311 

small.  A  captain  receives  higher  wages  than  a  sailor  , 
a  master  manufacturer,  higher  wages  than  his  journey- 
man ;  and  a  merchant,  higher  wages  than  his  clerk. 
The  circumstances  which  cause  these  differences,  re- 
main now  briefly  to  be  noticed. 

1.  The  price  of  labor  is  affected  by  the  ease  or  JifTi- 
culty,  the  pleasure  or  pain,  of  the  employment. 

\Vhen  the  employment,  for  instance,  requires  great 
muscular  effort,  the  number  of  persons  who  can  accom- 
plish it,  is  comparatively  small.  This  diminishes  the 
supply,  and,  of  course,  increases  the  price.  When 
this  is  the  case,  as  men  are  not  usually  attracted  by  the 
prospect  of  hard  labor,  a  smaller  number  a])ply  for  this 
kind  of  employment.  This  still  further  diminishes  the 
supply.  Hence,  the  price  will  rise,  as  the  wages  must 
be  increased  sufficiently  to  overcome  this  repugnance. 
On  the  contrary,  when  the  labor  is  easy,  the  number  of 
persons,  both  able  and  willing  to  perform  it,  is  in- 
creased ;  thus,  the  supply  is  large,  and  wages  falJ  in 
proportion. 

The  same  effect  is  produced  by  the  general  estima- 
tion of  the  pleasantness  or  unpleasantness  of  the  em 
ployment.  Any  kind  of  industry,  which,  from  necessity, 
is  uncleanly,  commands  higher  wages  than  one  which 
can  be  performed  without  interfering  with  personal  neat- 
ness. One  which  is  considered  disgraceful,  can  be 
supplied  with  laborers,  only  by  paying  an  unusual  price. 
'J'he  business  of  a  public  executioner,  though  not  diffi- 
cult, is  disagreeable,  and  generally  considered  disgrace- 
ful ;  and  hence,  in  countries  where  it  is  made  a  distinct 
[)rofession,  it  commands  high  wages.  The  labor  in  the 
learned  professions,  is  considered  honorable  ;  and,  thep;- 
fore,  it  is  less  highly  recompensed  than  the  same  degr»?e 
of  labor  and  skill  in  other  employments. 

2.  Wages  are  affected  by  the  skill  required  in  per« 
forming  the  operation.  This  arises  from  two  circum- 
stances :  First,  skill  can  be  acquired  only  by  practice 
and  education.  This,  as  has  been  explained,  is  in  itself 
costly,  and  is  an  investment,  for  which  the  possessoi 
j'istly  receives   an  emolument.      And,  secondly,  unusua' 


312     CAUSES  OF  DIFFERENCE  OF  LABOR. 

skill,  generally  supposes  some  unusual  endowment.  Bui 
in  proportion  to  the  rarity  of  the  endowment,  must  be 
the  smallness  of  the  supply,  and,  of  course,  the  rise  of 
price  which  must  be  paid  for  the  product. 

3.  The  confidence  reposed.  Wherever  a  great  arflount 
of  capital  is  employed,  it  must,  to  a  very  considerable 
degree,  be  placed  in  the  power  of  some  one  or  more 
agents.  Hence,  if  this  power  be  abused,  or  used  un- 
wisely, the  whole  is  liable  to  be  lost.  If  the  manager 
be  careless,  he  may  destroy  it  by  negligence  ;  and  if  he 
be  dishonest,  he  may  convert  it  to  his  own  emolument. 
Now,  this  union  of  judgment  with  incorruptible  integrity, 
is  absolutely  necessary  in  many  of  the  operations  of  pro- 
duction. But,  such  a  union  is  rarely  to  be  found. 
Hence,  while  the  demand  is  imperative,  the  supply  is 
small.  On  this  account,  though  the  wages  of  such  per- 
sons are  high,  it  is  generally  found  more  economical  to 
employ  them,  at  any  price,  than  to  intrust  important  af- 
fairs to  the  incompetent  and  the  vicious.  This  is  one 
of  the  rewards,  which,  in  the  course  of  human  events, 
God  bestows  upon  wisdom  and  virtue. 

4.  Certainty  or  uncertainty,  constancy  or  inconstancy 
of  employment.  Division  of  labor  requires  that  a  man 
devote  himself  exclusively  to  a  single  employment,  and, 
therefore,  that  his  whole  emolument  be  derived  from  that 
employment.  Hence,  when  the  opportunities  of  em 
ployment  are  rare,  the  wages  for  each  particular  opera- 
tion must  be  greater  ;  since  we  must  pay,  not  only  for 
the  time  actually  employed,  but  also  for  that  time  which 
is  lost  to  the  laborer,  while  waiting  for  employment. 
We  pay  more  money  for  riding  a  mile  in  a  hackney- 
coach,  than  for  riding  the  same  distance  in  a  stage- 
coach ;  because  the  hackney-coachman  may  stand  half 
a'day  in  waiting,  before  he  finds  another  customer.  For 
the  same  reason,  although  horse  keeping  is  higher  in  the 
city  than  in  a  country  town,  you  pay  less  money  for 
coach  hire  in  the  former  case,  than  in  the  latter,  because 
of  the  greater  steadiness  of  the  employment.  Thus, 
also,  when  a  trade  can  be  exercised  for  only  a  part  of 
ibe  year,  as  in  the  case  of  a  brick-layer,  you  pay  to  the 


CAUSES    OF    DIFFERENCE    OF    LABOR.  313 

laborer  higher  wage's  ;  because  he  must  receive  enough 
to  compensate  him  for  the  time  in  which  he  is  obhged  to 
lie  idle. 

5.  Another  circumstance  which  affects  the  price  of 
wages,  is  the  certainty  or  uncertainty  of  success.  In 
most  of  the  ordinary  avocations  of  hfe,  if  a  man  acquire 
die  requisite  skill,  he  will  invariably  find  employment. 
]u  the  professions,  it  is  not  so.  Those  who  have  pre- 
pared themselves  at  great  expense  for  the  practice  of  a 
profession,  unable  to  find  employment,  sometimes  relin- 
quish it  for  another  pursuit.  When  such  a  risk  exists, 
the  wages  of  labor  should  be  greater  ;  for  the  laborer  is 
entitled  to  a  remuneration  for  the  risk  of  this  loss  of  time 
and  of  capital. 

These,  I  believe,  are  the  principal  circumstances  on 
which,  irrespectively  of  the  influence  of  capital,  the 
price  of  labor  depends.  It  will  be  at  once  seen,  that 
they  are  susceptible  of  very  great  variety  of  modifica- 
tion, and  combination  ;  and  that,  frequently,  several  of 
tliem  must  be  taken  into  the  account,  in  order  to  explain 
the  reason  of  the  high  or  low  price  of  any  particular 
form  of  labor.  I  think,  however,  that  by  such  combi- 
nation, the  various  phenomena  of  wages  may  be  gener- 
ally explained. 

The  preceding  remarks  are  intended  to  apply  to  those 
cases,  in  which  the  individual  is  supported  xoholly  by 
his  own  labor.  When  an  individual,  or  a  class  of  in* 
div^iduals,  have  any  other  means  of  support,  the  price 
of  labor,  of  course,  falls,  and  can  be  subjected  to  no 
general  rule.  Thus,  a  large  portion  of  the  laboring 
class  of  females  are  supported,  in  part,  by  their  rela- 
tives ;  some  of  them  receiving  house-rent,  others,  both 
house-rent  and  food,  for  nothing.  Hence,  they  are  en- 
abled to  labor  for  a  price,  far  less  than  the  actual  cost. 
This  is  one  reason  why  the  price  of  female  labor,  espe- 
cially of  that  labor  which  requires  but  little  skill,  and 
which  can  be  done  at  home,  is  so  low.  Another  rea- 
son is,  that  the  customs  of  society  restrict  the  modes  of 
production  in  which  female  labor  may  be  employed 
Hence,  in  these  modes  of  production,  the  supj)ly  of  la 
27 


0*4  CAUSES    OF    DIFFERENCE    OF    LABOR 

bor  ii  greater  than  the  demand.  Hence,  also,  the  es 
tablishment  of  a  manufactory,  or  the  introduction  of  any 
kind  of  labor,  which  furnishes  a  new  mode  of  female 
employment,  advances  the  price  of  female  labor.  'J'nis, 
also,  is  the  reason  why  the  labor  performed  in  nunneries, 
moifjr.teries,  and  state  prisons,  is  sold  below  the  market 
price.  The  fact  is,  that  the  laborers  are  supported,  ei- 
ther in  whole  or  in  part,  by  a  separate  fund  ;  and  hence, 
there  is  no  natural  price  for  their  products,  ?ince  it  is 
not  regulated  by  the  cost. 


CHAPTER  SECOND. 

THE    PRICE    OF    MONEY,    OR    INTEREST. 


SECTION    I. 
OF    THE    BENEFIT    OF    CAPITAL    TO    THE    LABORER. 

Having,  in  the  preceding  chapter,  endeavored  to  il- 
lustrate the  principles  which  regnlate  the  rate  of  wages, 
we  now  proceed  to  ilhiStrate  those  which  regulate  the 
rate  of  interest,  or  the  price  of  capital. 

We  have  already  stated,  that  when  two  persons  were 
engaged  in  creating  a  product,  a  part  of  the  profit  be- 
longed to  the  labor,  and  a  part  to  the  capital.  Let  us 
first  consider  the  benefit  of  capital  to  the  laborer. 

Suppose  a  laborer  to  be  endowed  with  health,  and 
also  with  skill  sufficient  to  perform  an  operation  in  any 
mode  of  production.  His  power  is  made  up  of  two 
thinjis  ;  fii-st,  mere  muscular  force ;  and,  secondly,  sJcill. 
By  the  one,  he  is  enabled  to  exert  mere  brute  force,  as 
in  lifting,  carrying,  or  drawing.  By  the  second,  he  is 
enabled  Jo  avail  himself  of  the  use  of  natural  agents  ; 
for  skill  in  production  is  little  else  than  this  ability.*  But 
it  is  evident  that  his  labor  of  the  first  kind,  is  vastly  less 
productive  than  that  of  the  second  kind,  as  the  simple 
labor  of  a  man's  hands  is  less  productive  than  that  labor 
which  is  employed  in  directing  the  agents  of  nature. 

Suppose,  now,  a  man  entirely  deprived  ol  the  use  of 
capital  ;  his  labor  must  be  wholly  of  the  first  kind  ;  of 
course,  it  must  be  of  the  least  productive  quality,  and  it 
must  earn  the  lowest  rate  of  wages.  Suppose  a  black- 
smith, of  ever  so  great  skill,  destitute  of  forge,  hammer, 
anvil,  and  of  all  his  tools,  •'nd  also  of  iron  upon  which  tc 


316       BENEFIT    OF    CAPITAL    TO    THE    LABORER. 

employ  them  ;  he  can,  in  no  manner,  avail  himself  of  his 
skill,  or  of  the  use  of  the  natural  agents  with  which  he 
is  acquainted,  and  he  must  either  perish  or  else  earn  his 
livelihood  by  simple  labor ;  that  is,  by  the  putting  forth 
of  mere  brute  force,  without  any  benefit  from  his  skill, 
though  it  be  ever  so  great.  But,  let  some  one  loan  hira 
a  shop  and  tools,  with  iron  and  coal  sufficient  «o  cairy 
on  his  business,  and  he  can,  at  once,  avail  himself  of 
his  skdl  ;  that  is,  of  the  use  of  those  natural  agents, 
with  which  he  is  acquainted.  His  labor  will  now  be- 
come vastly  more  productive  ;  that  is,  he  can,  in  a  given 
time,  create  a  vastly  greater  amount  of  value  than  be- 
fore, and  will,  of  course,  receive  a  much  larger  recom- 
pense. If  his  simple  labor  were  wmih  one  dollar  per 
day,  his  labor  and  skill  will  now  probably  be  worth  at 
least  two  dollars  ;  that  "is,  the  capital  which  he  uses,  has 
at  least  doubled  his  wages.  This,  at  the  rate  of  three 
hundred  working  days  in  a  year,  would  be  equal  to  three 
hundred  dollars,  which  he  receives  for  the  use  of  the 
capital  which  was  loaned  to  him.  Suppose  that  this 
capital  were  worth,  originally,  five  hundred  dollars  ;  and 
that  he  paid  for  the  use  and  wear  and  tear  of  it,  ten  per 
cent,  per  year;  he  might  then  pay  fifty  dollars  for  the  use 
of  it,  and  have  two  hundred  and  fifty  dollars  nett  profit, 
over  and  above  the  wages  which  his  simple  labor  could 
earn.  In  two  years,  he  might,  besides  paying  the  inter- 
est, pay  for  the  whole  capital,  and  thus  own  it  himself. 
He  would  then  be  entitled  to  all  the  profit  derived 
from  the  three  several  sources  :  first,  his  labor  >  second- 
ly, his  skill;  and,  thirdly,  the  use  of  the  capital,  upon 
which  his  labor  was  employed. 

I  have,  in  the  above  case,  supposed  the  laborer  to 
borrow  the  shop,  tools,  and  materials.  This  is  not  the 
ordinary  way  in  which  capital  is  borrowed.  It  is  much 
more  common,  and  much  more  convenient  for  him,  who 
wishes  to  borrow  the  capital  with  which  to  employ  his 
skill,  to  brrrow  it  in  the  form  of  money,  which  he  im- 
mediately transforms  into  that  kind  of  capital,  which  his 
occupatirn  requires.  Hence,  contracts  of  this  kind  are 
always   estimated    in   money.       And   hence,    interest  is 


BENEFIT    OF    CAPITAL    TO    THE    LABORER.       317 

commonly  called  the  price  of  money.  It  is  CAident, 
however,  that  it  is  not  the  monet/,  but  the  capital,  which 
is  wanted  ;  because,  as  soon  as  the  man  obtains  the 
money,  he  at  once  exchanges  it  for  capital.  This, 
therefore,  should  always  be  borne  in  mind,  that  when  we 
speak  of  the  price  of  money,  we  mean  the  price  of  cap- 
ital, for  which  the  money  is  always  exchanged. 

Hence  we  see,  that  the  laborer  may  derive  very  greal 
oenofil  from  the  loan  of  money  ;  that  is,  of  capital.  He 
is  thus  enabled  to  employ,  advantageously,  all  his  skill. 
and  thus,  a  loan  for  a  few  years  is  very  frequently  the 
conmiencement  of  a  fortune.  And  bence  we  see,  as  we 
have  said  before,  how  very  absurd  is  the  prejudice  so 
commonly  excited  against  money-lenders,  and  money- 
lending  institutions.  Were  there  no  money-lenders, 
there  could  be  no  money-borrowers  ;  and  were  there  no 
money-borrowers,  the  industrious  artisan  would  surely  be 
ihe  greatest  sufferer.  It  is  not  denied  that  the  money- 
lender, loans  for  his  own  advantage.  But,  I  do  not  see 
why  it  is  any  more  odious  for  one  man  to  lend  for  his 
own  advantage,  than  for  another  man  to  borrow  for  his 
own  advantage.  It  is  not  pleaded,  that  the  one,  any 
more  than  the  other,  is  benevolent.  This  is  quite  anoth- 
er question.  All  that  is  pleaded  is,  that  both,  in  so  far 
as  the  things  themselves  are  concerned,  are  equally  hon- 
est and  honorable.  In  both  cases,  the  man  benefits 
himself  while  he  benefits  others  ;  and  this  is  all  that  can 
be  said  in  favor  of  any  other  exchange.  It  is  not,  of 
course,  denied,  that  the  lender  may  be  oppressive,  ty- 
rannical, and  avaricious ;  nor  that  the  borrower  may  be 
fraudulent,  indolent,  and  profligate.  But  this  afl!ects  not 
the  nature  of  the  transaction  per  se.  We  here  speak  of 
ihe  thing  itself,  and  not  of  the  manner  in  which  either 
parly  may  act,  in  consequence  of  or  in  connexion  with  it. 

I  have  stated  but  one  form  in  which  the  laborer  is 
benefited  by  the  use  of  capital.  Another  foim  of  siid- 
ilar  advantage  is  equally  common. 

Suppose  that  a  village  were  destitute  of  capital,  and 
that  its  inhabitants  were  therefore  obliged  to  be  employ- 
ei  in  simple  labor,  or  in  that  which  required  the  least 
27» 


318       BKNEFIT    OF    CAPITAL    TO     THE    LABORER. 

skill,  and,  ihererore,  produced  the  lowest  wages.  They 
would,  consequently,  be  poor,  and  would  be  able  to  ac- 
cumulate very  little  ;  since,  their  whole  earnings  would 
be  scarcely  more  than  sufficient  to  provide  them  will? 
the  necessaries  of  life.  Let,  now,  an  opulent  man 
come  among  them,  and  establish  a  manufactory  which 
should  employ  every  inhabitant  capable  of  labor.  Every 
one  knows,  that,  by  this  means,  the  wages  of  labor  would 
be  doubled,  and  all  the  comforts  of  living  would  be  in- 
comparably increased.  The  reason  is  the  same,  in  prin- 
ciple, as  in  the  other  case.  The  capitalist  furnishes  the 
materials  and  the  tools,  by  which  the  laborer  is  now  en- 
abled to  use  his  skill,  in  addition  to  the  simple  labor, 
which  he  used  formerly  ;  that  is,  by  which  he  is  enabled 
to  labor,  not  with  his  hands,  but  also  with  the  agents 
of  nature.  The  result  is,  a  great  increase  of  the  pro 
ductiveness  of  industry  ;  and,  of  course,  a  much  large) 
amount  than  before,  becomes  the  portion  of  the  laborer 
In  the  division  of  the  profits  the  owner  receives  pay- 
ment for  the  use,  wear  and  tear,  and  risk  of  his  instru- 
ments, for  the  use  and  risk  of  his  material,  and  for  his 
own  labor  and  skill  in  supervision,  if  he  superintend  ;  or 
for  the  labor  and  skill  of  another,  if  he  does  it  by  a 
deputy.  The  workman  receives  payment  for  his  labor 
and  for  his  skill,  according  to  the  principles  illustrated  in 
the  preceding  chapter.  We  see,  that,  in  this  case,  the 
laborer  is  as  truly^  benefited  by  the  use  of,capital,  as  in  the 
former.  The  only  difference  is,  that  here  he  receives 
payment  only  for  labor  and  skill  ;  and  there  he  received 
payment  for  the  use  of  capital,  deducting  the  rate  of  in- 
terest and  the  risk  of  loss.  It  will  be  easy  to  apply  the 
principle  here  illustrated  to  other  cases.  When  a  mer- 
chant borrows  capital,  he  is  thus  enabled  to  use  his  skill 
in  exchange.  Hence,  the  use  of  capital,  makes  the  dif- 
ference between  his  wages  as  a  merchant,  and  what  his 
wages  would  be,  were  he  a  common  laborer.  And  so 
of  any  other  case. 

♦  Hence,  we  see  how  incorrect  is  the  notion  frequently 
advanced,  that  when  property  is  destroyed  by  fire  or 
flood,  qr  in  any  other  manner,  it  is  of  no  consequence 


OF    RISK    OF    INVE^TMt:N"%  319 

to  the  community  ;  since  it  was  nothing  but  the  posses- 
sions of  the  rich.  The  rich  may,  or  may  not,  suffer  in 
their  comforts  and  conveniences,  by  such  a  loss  ;  but  the 
poor  always  must  suffer.  The  very  means  by  which 
their  wages,  are  raised  from  those  of  simple  to  those  of 
skilful  labor,  from  the  wages  of  labor  with  their  hands 
alone  to  the  wages  of  labor  with  the  agents  of  nature,  is 
thus  taken  away.  Remove  capital,  and  they  have  noth- 
ing to  offer  in  exchange,  but  mere  physfcal  force. 
Hence,  it  is  always  to  be  remembered,  that,  in  the  de- 
struction of  property,  the  poor  are  always  the  greatest 
stifferers. 

It  is  evident,  then,  that  capital  loaned,  should  be  paid 
for.  Interest  is  no  extortion,  and  no  unreasonable  de- 
mand. It  is  for  the  advantage  of  the  skilful  laborei  to 
borrow^it,  at  a  reasonable  interest,  as  much  as  it  is  for 
the  advantage  of  the  capitalist  to  loan  it  ;  and  it  is  as 
much  for  the  advantage  of  the  laborer  as  the  capitalist, 
to  enter  into  that  partnership,  by  which  they  share  the 
profits  of  the  operation  between  them.  It  is  by  reason 
of  this  partnership,  as  I  have  said,  that  the  laborer  re- 
ceives the  wages  of  skilly  instead  of  the  wages  of  mere 
physical  force  ;  and  the  capitalist  is  able  to  eniploy  all 
his  capital  in  production,  instead  of  employing  only  that 
portion  of  it,  which  he  could  employ  with  simply  his 
OW1)  personal  industry  and  skill. 

Wo  next  proceed  to  consider  the  circumstances  which 
vary  the  rate  of  interest  at  which  capital  may  be  borrow- 
ed. These,  I  suppose  to  be  three,  viz :  1st.  Risk, 
!Jd.  Convenience  of  Investment ;  and,  3d.  Productive- 
ness of  Capital. 


SECTION  II. 

OK    RISK    AND    CONVENIENCE    OF    INVESTMENT. 

I.    Of  Risk.       When  a  man    loans    his   property  to 
another,  there  is  always  a  risk  of  his  never  being  repaid 


320  <^    RISK^OF    INVESTMENT. 

Now,  the  greater  this  risk,  the  greater  will  be  the  intei 
est  which  a  capitalist  may  justly  demand.  He  who 
would  loan  to  one  man,  at  six  per  cent.,  when  he  was 
sure  of  being  repaid,  would  not,  surely,  loan  to  another 
man,  at  the  same  rate,  when  there  were  fifty  chances  in 
a  hundred,  that  he  would  lose  both  principal  and  inter- 
est. At  any  rate,  he  who  did  so,  would  very  soon 
cease  loaning  altogether. 

This  risk  depends  upon  several  circumstances.  Of 
ihese,  the  principal  are  :  the  nature  of  the  employment , 
the  character  of  the  borrower ;  and  the  character  of  the 
government. 

.1.  There  is  a  difference  in  risk,  arising  from  the  dif- 
ferent modes  of  employing  capital.  For  instance,  prop- 
erty at  sea,  is  more  liable  to  destruction  than  property 
on  land.  Hence,  the  ancient  Athenians  made  a  differ- 
ence between  land  and  marine  interest.  The  formei 
was  at  twelve,  and  the  latter  as  high  as  sixty  per  cent, 
per  annum.  Property  in  merchandise  is  more  liable  to 
be  destroyed,  than  property  in  houses ;  property  in 
houses,  than  property  in  farms.  A  house  in  the  country, 
is  safer  than  a  house  in  town  ;  and  a  stone  house  is  safer 
than  a  wooden  house.  Property  employed  in  the  man- 
ufacture of  cotton,  is  less  liable  to  be  destroyed  than 
property  employed  in  the  manufacture  of  gunpowder 
Now,  when  a  capitalist  loans  property  to  be  invested  m 
some  one  of  the  above  forms  of  capital,  and  his  only  se- 
curity for  payment  consists  in  his  hold  upon  the  property 
in  which  it  is  invested,  it  is  evident  that  his  risk,  other 
things  being  equal,  will  depend  upon  the  safety  of  that 
property.  Hence,  it  is  reasonable  that  his  remuneration 
for  risk,  should  correspond  with  the  greatness  of  that  risk. 

2.  The  second  circumstance  which  enters  into  risk, 
is  the  personal  character  of  the  borrower.  This  is 
made  up  of  industry,  skill,  knowledge  of  business,  pe- 
cuniary ability,  and  moral  character.  When  these  have 
not  been  tested,  or  where,  having  been  tested,  they  have 
been  found  insufficien*  to  the  safe  conduct  of  business, 
there  will  be  a  correspondent  indisposition  in  his  neigh- 
bors to  loan  ;  because,  every  one  feels  that  there  is,  in 


OF     RISK     OF    INVESTMENT.  321 

such  a  case,  more  than  a  usual  risk.  Hence,  such  an 
individual  cannot  borrow,  unless  at  an  advanced  pre- 
niiuni,  or  at  a  higher  rate  of  interest.  On  the  contrary, 
if  a  man  have  conducted  an  extensive  business,  for  a 
long  period,  with  undeviating  success,  he  attains  to  a 
high  mercantile  credit,  and  is  enabled  to  borrow  monty 
at  the  lowest  rates.  But,  if  a  merchant  be  known  to 
be  frequently  embarrassed  ;  if  he  have  ever,  or  specially 
have  more  than  once,  failed  ;  mercantile  confidence  in 
him  is  (lestroyed.  No  one  will  lend  him,  except  on  the 
most  unfavorable  terms  ;  hence,  he  can  do  business  with 
nothing  but  his  own  capital,  and,  of  this,  he  is  generally 
destitute.  Hence,  a  failure,  and  specially  a  second  fail-, 
ure,  is  commonly  fatal  to  mercantile  success.  Firm 
credit  is  rarely  afterwards  established. 

I  am  aware  that  these  two  causes  of  variation  of  risk, 
are   apparently   modified,  by   the  piactice  of  endorsing 
private  notes.      If  1  want  money  for  the  most  hazardous 
investment,  or  am  of  the  most  doubtful  credit,  if  1  can 
offer  my  note,  endorsed  by  persons  of  established  mer- 
cantile character,  it  is  raised,  at   once,  to  par  ;   that  is, 
the  extra  risk  is  immediately  removed.      But  this  modifi- 
cation is  only  apparent.     The  endorser  will  rarely  do 
tins  for  nothing.     Pie  either  himself  receives  a  premium 
for  it,  directly  ;   that  is,  he  is  paid    for  taking  the  risk  of 
default  of  payment ;  or   else,  two  persons  n)ulually  en 
dorse  for  each  other,  and  thus,  the  risk  which  A  assumes 
for  B,  is  paid  for,  by  B's  assuming  a  similar  risk  for  A 
It  is  singular,  that  anyone  should  ever  ask  another  to  en 
dorse  his  note  merely  as  a  matter  of  comity.      It  should 
always  be  a  nialler  of  business,  and  liable  to  be  paid  for, 
like  any  other  business  transaction.     A  merchant  shouKI 
no  more  ask   another  to  endorse  his  note   gratuitously 
than  he  should  ask  him  to  insure  his  house  gratuitously. 
The  nature   of  the  transaction   is  precisely    the    same 
The  risk  in  the  one  case,  is  frequently  as  great  as  in  the 
other  ;  and  it  should  always,  as  much  in  the  one  case  as  in 
the  other,  be  a  matter  of  compensation.      Such,  at  least, 
seenis  to  me  to  be  the  nature  of  the  case. 

3.   The  risk   incurred  in  lending  capital,  is  affected 


323  CF    RISK    OF    liNVESTMENT. 

by  the  character  of  the  government.     This  affects  both 
private  and  public  contracts. 

If  justice  be  well  administered,  and  every  man  have 
all  reasonable  security  that  he  will  have  the  whole  power 
of  the  society  at  his  disposal,  in  order  to  enforce  a  just 
contract  ;  of  course,  the  risk  is  less,  and  the  rale  of  in- 
terest lower,  than  when  experience  has  shown,  thai  no 
such  security  exists.  Hence,  we  see  the  economy  of 
cood  legislation,  and  of  a  wise,  just,  and  incorruptible 
Judiciary.  The  additional  interest  on  capital,  incurred 
♦  in  consequence  of  the  bad  administration  of  justice  In  a 
country,  would  annually  pay  the  expenses  of  all  the 
courts  of  law,  ten  times  over. 

The  same  results  flow  from  confidence,  or  the  want 
of  confidence,  in  the  stability  of  a  government.  A  rev- 
olution not  unfrequenlly  dissolves  contracts,  dissipates 
security,  and  renders  obligations  valueless,  bgth  by  de- 
stroying the  evidence  of  their  existence,  and  annihilating 
the  means  of  enforcing  them.  Hence,  when  such  an 
event  is  feared,  men  will  not  loan,  except  at  an  exorbi- 
tant premium  ;  and  they  generally  prefer  removing  their 
property  to  some  other  country,  to  subjecting  it,  for  any 
premium  whatever,  to  the  risks  of  a  revolution. 

The  same  may  be  said  of  public  contracts.  Govern- 
ments, in  whose  stability  undoubted  confidence  is  repos- 
ed, borrow  the  most  enormous  sums,  at  the  lowest  rates 
of  interest.  Those,  which  are  in  daily  danger  of  being 
overthrown,  can  scarcely  borrow  at  all,  or,  if  they  do 
borrow,  it  is  at  the  most  ruinous  premium.  The  South 
Ameiican  governments  can  scarcely  borrow  at  any  in- 
terest. Great  Britain,  notwithstanding  her  present  enor 
moiis  debt,  borrows  at  three  or  four  per  cent.,  to  an) 
amount  she  pleases.  Nay,  so  great  is  the  public  confi- 
dence in  her  permanency  and  integrity,  that,  probably, 
there  is  scarcely  a  civilized  nation  on  earth,  which  docs 
not  at  present  own  some  share  of  her  national  dubt. 
The  greater  the  civil  commotions  of  other  countries,  the 
Tiore  easily  can  she  borrow  ;  because,  capitalists  natu- 
rally invest  their  property  where  they  are  confident  of  its 
security  ;  and  confident  that  its  interest  will,  under  all 
circumstances,  be  regularly  paid. 


CONVTCNIEHCE    OF    INVESTMENl .  S23 

II.  The  rate  of  interest  is  varied  by  the  convenience 
of  the  investment.  The  convenience  of  an  investment, 
depends  upon  several  circumstances. 

1.  Facility  of  transfer.  When  a  man  loans  capital 
he  is,  of  course,  ignorant  of  the  future,  and  does  nol 
know  how  much  he  may  need  it,  at  some  subseqq^iii 
time.  If  he  loan  at  six  per  cent.,  for  two  years,  he  may, 
in  six  months,  find  some  investment  in  which  it  vvouhl 
yield  him  eight  per  cent.  ;  but,  having  loaned  it  for  two 
years,  he  cannot  now  withdraw  it.  Hence,  it  is  a  great 
advantage,  if  it  can  be  so  invested,  that  he  may,  without 
loss,  recall  it  at  any  moment. 

2.  Permanency  of  investment.  If  a  man  does  not 
wish  to  withdraw  a  loan,  it  is  an  advantage  to  him  to 
have  it  continue  for  a  long  period  ;  because,  he  is  thus 
saved  the  lass  of  interest  which  would  occur  during  the 
time  of  transfer,  and  the  trouble  and  inconvenience  of 
finding  another  borrower.  This  is  of  special  benefit  to 
widows,  orphans,  persons  retired  from  business,  and  all 
those  persons  who  wish  not  to  labor  with  their  own  cap- 
ital themselves,  but  only  to  live  upon  the  interest  of  it. 

3.  Punctuality  in  the  payment  of  interest.  It  is  a 
great  convenience  to  those  who  invest  capital,  to  be  able 
to  calculate  with  certainty  on  the  payment  of  interest. 
They  can  thus,  with  ease,  adjust  their  expenses,  both  to 
the  amount  of  their  income,  and  to  the  time  of  their  re- 
ceipt of  it.  If  they  wish  to  re-invest  the  interest,  they 
can  make  their  arrangements  with  certainty  ;  and  thus  in- 
vest it  with  the  greatest  advantage.  They  are  also  saved 
the  trouble  of  looking  after  their  debtor,  and  they  avoid 
the  inconvenience  of  that  personal  altercation,  which  i? 
liable  to  arise  respecting  pecuniary  transactions. 

When  any  form  of  investment  combines  these  advan 
Inges,  men  are  found  to  prefer  it  to  one  which  is  desii- 
lute  of  them  ;  and  hence,  they  will  loan  their  money  on 
these  terms,  at  a  lower  rate  of  interest  than  on  any  oth- 
er. When  a  debt  is  in  this  form,  it  is  said  to  be  fund- 
ed ;  and  the  creditors  are  said  to  hold  stuck.  Hence, 
Dublic  debts  are  generally  thus  arranged.  The  various 
companies,  formed  for  banking   purposes,  and   purposes 


3S4  INTEREST    DEPENDING    ON    PROFII 

of  internal  improvement,  are  constructed  on  the  same 
principles.  Every  one  who  contributes  a  certain  amouni 
towards  the  capital  of  such  a  company,  receives  a  certifi- 
cate that  he  owns  such  a  share  of  that  capital.  He  is 
entitled  to  his  portion  of  the  profits  at  stated  times.  He 
may^  retain  this  certificate  himself,  as  long  as  he  pleases  ; 
or  he  may  sell  it,  at  any  moment,  to  any  purchaser  who 
may  want  it.  Hence,  money  may  always  be  borrowed, 
under  these  circumstances,  at  the  lowest  rates. 


SECTION  IIT. 

OF  THE  RATE  OF  INTEREST,  AS  AFFECTED  BY  THE 
USE  OF  CAPITAL. 

When,  liowever,  the  risk  is  the  same,  we  find  interest 
higher  in  some  countries  than  in  others  ;  and  higher  in 
the  same  country  at  one  time  than  at  another.  Thus, 
when  the  security  is  equally  good,  interest  is  higher  in 
this  country -than  in  Great  Britain  ;  and,  in  this  country, 
it  is  higher  in  the  new,  than  in  the  older  states.  And, 
we  also  find,  that  it  is  lower  now,  in  Great  Britain,  than 
formerly  ;  and  that  it  generally  becomes  less,  as  a  com- 
munity grows  older. 

This  shows  that  there  must  be  causes  of  variation  in 
interest,  aside  from  that  of  risk.  A  few  of  these  re- 
main to  be  considered. 

I.  The  average  Profit  of  Capital.  The  profit  ol 
capital  is  that  annual  value  which  it  yields  to  the  possess 
or,  after  he  has  deducted  the  principal,  and  paid  the  ex 
penses  incident  to  his  actual  operation.  Thus,  if,  \fy 
the  use  of  one  thousand  dollars  for  a  year,  I  am,  after 
replacing  the  principal  and  all  the  cost  of  my  operation, 
one  hundred  dollars  richer,  this  one  hundred  dollars  is 
the  profit  of  my  capital.  Now,  the  greater  this  is  at 
any  time,  the  greater  will  be  the  sum  which  T  shall  be 
willing  to  pay  for  the  use  of  one  thousand  dollars.     If, 


SUPPLY    ANO    DFttAND.  325 

by  the  use  of  capital,  I  can,  after  paying  all  expenses, 
realize  twenty  per  cent.,  I  can  afford  to  pay  more  for  the 
use  of  it,  than  if,  after  paying  all  expenses,  1  could  re- 
alize only  five  per  cent. 

To  specify  the  various  causes  on  which  the  difference 
of  nrofit  of  capital  depends,  perhaps  would  be  impossi- 
ble. Those  which  seem  to  me  of  the  most  general  ini- 
pertance,  are  : 

I  Fertility  of  Land.  He  who  wished  to  borrow 
money  to  invest  in  agriculture,  could  afford  to  pay  higher 
interest,  when  the  land  produced  fifty  bushels  to  the 
acre,  than  when  it  produced  only  twenty-five  bushels  to 
ilie  acre,  provided  he  could  procure  the  land  for  the 
same  purchase  money. 

2.  Productiveness  of  Industry.  The  use  of  natural 
agents  adds  greatly  to  the  value  annually  produced  from 
ji  given  amount  4)f  capital.  This  will  tend  to  raise  the 
j»rice  of  capital  ;  since  a  man  will  give  more  for  money 
to  invest  in  a  machine  which  will  produce  one  thousand 
dollars  a  year,  than  in  one  which  will  produce  only  five 
hundred  dollars.  It  is  true  that  the  influx  of  capital  will 
lend  to  bring  any  one  branch  of  industry,  in  process  of 
time,  to  the  general  level.  But  that  progressive  it)-, 
crease  of  productiveness,  which  belongs  to  the  progress 
of  civilization,  tends  to  keep  up  the  price  of  capital, 
which  would,  otherwise,  fall  unreasonably  low. 

.3.  The  Demand  for  Exchange.  The  greater  the  de- 
mand for  exchange,  the  more  profitable  must  be  that 
capital  which  is  invested  in  exchange.  In  a  town  v/here 
mercantile  business  is  brisk,  and  a  man  can  sell  all  his 
stock  at  a  good  profit,  two  or  three  times  in  the  course  of 
a  year,  money  will  bear  a  higher  interest  than  in  a  town 
A  here  exchanges  are  slow,  and  he  must  keep  his  goods 
on  hand  for  a  year  or  two. 

n.  The  Ratio  betieeen  Supply  and  Demand.  This 
produces  the  same  effect  upon  the  rate  of  interest,  as 
upon  every  thing  else.  Whatever  be  the  profit  of  cap- 
ital, if  the  supply  be  very  small,  the  price  will  rise  ir. 
projjortion  ;  since  he,  who  by  employing  it  at  a  high 
price,  can  make  a  small  profit,  will  rather -fio  employ  it» 
28 


326  SUPPLY    AND    DEMAND. 

than,  by  doing  without  it,  make  no  profit  at  all.  Thus, 
if,  by  the  use  of  one  thousand  dollars  for  a  year,  7  could 
realize  five  hundred  dollars,  I  might  be  willing  to  pay 
two  hundred  for  the  use  of  it,  rather  than  not  to  have  it; 
for,  in  the  latter  case,  I  should  gain  nothing.  If,  then, 
there  were  but  little  capital  in  the  market,  and  many 
persons  were  as  willing  to  give  this  rate  of  interest  a? 
myself,  I  should  be  obliged  to  give  it.  But  if,  on  th^^  con- 
Irary,  there  were  many  persons  desirous  of  lending,  and 
there  was  much  capital  in  the  market,  and  I  were  the  on- 
ly person  who  would  be  willing  to  give  this  interest,  they 
would  underbid  each  other,  and  I  should  be  able  lo 
procure  it  of  him  who  would  loan  it  to  me  at  the  lowest 
rale.  I  might  then  be  able  to  borrow  it  for  one  hundred 
and  fifty,  one  hundred,  or  sixty  dollars  per  annum. 

Hence,  the  rate  of  money  will  vary  in  any  country, 
according  to  the  effect  of  these  two  circumstances.  In 
a  new  and  prosperous  country,  interest  is  always  high. 
This  results  from  several  reasons. 

1.  Land  is  very  cheap,  and  at  first  is  all  of  very  near- 
ly the  same  market  price.  In  many  cases  it  can  be 
had  for  almost  nothing. 

2.  Land  is  very  fertile.  The  produce  of  a  soil  when 
new  is  generally  greater  than  ever, afterwards. 

3.  The  soil,  never  needing  manure,  requires  but 
small  investments  of  capital,  and  these  are  very  richly 
repaid. 

4.  The  inhabitants  of  a  new  country  can  carry  with 
them  but  few  of  the  conveniences  of  life.  These  must 
be  purchased  after  they  arrive  there,  and  must  either  be 
made  on  the  spot,  or  be  imported.  Neither  of  these 
can  be  done  without  capital.  And,  as  the  demand  for 
these  conveniences  is  imperative,  and  as  the  income  of 
land  is  abundant,  the  settlers  are  willing  to  pay  a  high 
price  for  tliem.  Hence,  the  profit,  both  of  mechanical 
and  of  commercial  labor,  is  very  great  ;  and  tlie  price 
which  is  paid  for  capital  is  very  high. 

5.  The  inhabitants  of  a  new  country  have  generally 
vcf)'  numerous  exchanges  with  the  aborigines.  Such 
exchanges  ate  exceedingly  profitable.      But  these-  cap 


SUPPLY    AND    DEMAND.  S27 

not  be  carried  on  without  capital ;  and,  of  course,  capi- 
tal, on  this  account,  always  bears  a  very  high  price. 

On  the  contrary,  the  supply  of  capital,  in  a  new  coun- 
try, is  generally  small. 

1.  Emigrants  are,  by  no  means,  the  most  wealthy 
classes  of  a  community.  Those  who  are  living  in  peace 
and  prosperity  at  home,  are  not  generally  those  who  are 
most  willing  to  brave  the  perils  and  hardships  of  the  wil- 
derness. 

2.  Those  who  are  not  inclined  to  expose  their  person» 
to  the  hardships  of  a  new  country,  are  not  inclined  to 
send  their  capital  where  they  are  not  present  to  watch 
over  it  themselves.  Hence,  it  is  difficult  for  a  while, 
for  a  new  people  to  borrow ;  and  they  can  overcome 
this  difficulty  only  by  the  payment  of  a  high  interest. 

These  are,  as  I  suppose,  the  causes  of  the  high  rate 
of  interest  in  new  countries,  on  the  borders  of  civilization, 
and,  generally,  wherever  savage  and  civilized  nations 
intermingle. 

As  a  country  becomes  settled,  however,  these  causes 
begin  to  operate  less  powerfully  ;  and  thus,  the  rate  of 
interest  gradually  diminishes. 

1.  The  annual  produce  of  the  earth  is,  year  after 
year,  ch?nged  into  fixed  capital  :  and  thus,  the  demand 
for  capital  is  supplied  from  themselves. 

2.  The  fertility  of  the  soil  diminishes,  so  that  it  will 
afford  to  pay  less  interest. 

3.  Land  is  sold  at  different  prices,  according  to  its 
fertility;  and,  as  it  rises  in  price,  the  degree  of  profit  to 
the  purchaser  is  diminished. 

4.  The  wants  of  the  natives  are  supplied;  and,  hence, 
one  source  of  gain  is  dried  up. 

5.  A  more  perfect  knowledge  of  the  country,  and 
more  |)erfect  confidence  in  its  prosperity,  diminish  the 
unwillingness  of  persons  in  older  countries  to  loan ; 
inid  hence,  capital  from  abroad,  may  be  procured  with 
greater  facility. 

Hence,  the  gradual  operation  of  these  causes,  njusl 
tenc*  to  reduce  the  rate  of  interest  in  different  countries 
to  tne  same  average. 


328  FREEDOM    OF    CAPITAL. 

Hence,  the  constant  tendency  of  civilization,  is  to  the 
reduction  of  the  rate  of  interest.  As  capital  becomes 
£nore  abundant,  in  proportion  to  the  uses  that  are  to  be 
made  of  it,  it  commands  a  less  price ;  that  is,  a  man 
can  gain  less  than  formerly  with  a  capital  of  one  thou- 
sand dollars;  and  hence,  he  is  willing  to  pay  a  less  inter- 
est for  it.  But  it  is  also  to  be  remembered,  that  a  much 
larger  proportion  of  men  are  worth  one  thousand  dollars 
than  formerly,  and  that  for  one  that  was  worth  onf 
thousand  dollars,  fifty  years  ago,  there  are  fifteen  oi 
twenty  who  are  worth  ten  thousand  dollars  now ;  that  is, 
men,  with  the  same  labor,  are  able  to  secure  as  many 
or  more  comforts  than  formerly  ;  but  they  are  obliged 
to  do  it  by  the  use  of  a  larger  amount  of  capital.  They 
are  obliged  to  labor  with  a  larger  capital,  but  that  large 
amount  is  as  easily  procured  as  a  less  amount  was  for- 
merly. Hence,  the  complaint  so  frequently  heard  of 
the  increasing  difficulty  of  accumulating  property,  is 
really  unfounded  ;  and,  taking  the  difficulty  or  ease  of 
procuring  capital  into  the  account,  the  more  advanced 
periods  of  society  are  as  favorable  as  any  to  the  industri- 
ous classes. 

III.  The  rate  of  interest  is  affected  by  the  freedom 
of  capital.  By  freedom  of  capital,  I  mean  the  unfetter 
ed  hberty  of  the  individual  to  employ  his  capital  in  any 
innocent  way  that  he  pleases.  When  this  liberty  is  en- 
joyed, every  one  chooses  that  way  in  which  he  supposes 
that  he  shall  be  most  successful ;  that  is,  in  which  he 
will  reap  the  largest  profit.  The  larger  the  profit  he 
roalizos,  the  larger  will  be  the  interest  which  he  will  be 
willing  to  pay.  When  he  is  obliged  to  withhold  it  from 
a  mode  of  investment  which  he  prefers,  and  to  employ 
it  in  one  which  he  does  not  prefer  ;  he  must,  therefore 
di/cit  it  from  a  more  to  a  less  profitable  mode  of  invest- 
ment. Hence,  as  he  is  obliged  to  employ  it  in  a  less 
profitable  instead  of  a  more  profitable  investment,  he 
can  afford  to  pay  less  interest ;  and  the  price  of  interest, 
by  the  effect  of  this  interference,  must  fall.  Such  must 
be  the  effect  of  all  monopolies,  and  of  all  means  by 
which  the  active  power  of  capital  is  diminished 


INTEREST    AFFECTfcD    BY    TAXATION.  329 

IV".  The  rate  of  interest  is  affected  by  taxation.  A 
tax,  abstracts  its  whole  amount  realized,  besides  the 
cost  of  collecting  it,  from  the  annual  profits  of  capital. 
If  a  mechanic  reahze,  from  a  capital  of  one  thousand 
dollars,  a  nett  saving  of  one  hundred  and  fifty  dollars, 
and  is  obliged  to  pay  fifty  dollars  of  this  sum  in  taxes, 
he  is  in  the  condition  of  one  who,  without  being  obliged 
to  pay  taxes,  reahzed  a  saving  of  only  one  hundred  dol- 
lars. Hence,  he  would  be  able,  if  he  conducted  his 
business  upon  a  hired  capital,  to  pay  only  a  diminished 
rate  of  interest.  And,  if  it  be  said  that  he  may  raise 
the  price  of  his  labor,  and  thus  repay  himself^ it  may  be 
answered  :  1st.  By  raising  the  price  of  his  labor,  he 
diminishes  the  demand,  and  his  profits  are  thereby  re- 
duced, so  that  he  will  be  no  better  able  to  pay  the  inter- 
est in  question.  And,  2dly,  as  other  men  being  taxed, 
will  raise  tl  6ir  prices,  he  is  obliged  to  pay  more  for 
every  thing  that  he  consumes ;  and  thus,  again,  his  abil- 
ity is  lessened.  Every  one  must  see,  that  the  immense 
sum  which  Great  Britain  annually  pays,  as  the  interest  of 
her  national  debt,  is  so  much  abstracted  from  the  profits 
of  her  capital ;  and  that  the  amount  of  profit  to  the  indi- 
viduals must  be  greater,  just  in  proportion  as  that  is 
diminished  ;  and  that  the  profits  of  the  capitahst  and  the 
producer  would  rise  accordingly. 

From  what  has  been  said  above,  we  come  to  the  fol- 
lowing general  conclusions  : 

1.  That,  other  things  being  equal,  interest  will  be 
high  when  the  risk  is  great ;  and  low,  when  the  risk  is 
small. 

2.  Thai  interest  w]ll  be  high,  when  the  profit  of  capi- 
tal is  great ;  and  low,  when  the  profit  of  capital  is  small. 

3  That  both  of  these  aflect  each  other,  within  cor- 
td\i\  limits  ;  that  is,  when  profit  is  great,  if  the  risk  be 
bIso  great,  interest  will  be  very  high ;  because  the  in- 
crease of  risk  diminishes  the  supply. 

4.   But,  when  profit  is  low,  and   risk  is  great,  there 
will  be  no   loaning  whatever  ;  because,  what  is  paid  for 
risk,  will  be  more  than  can  be  gained  by  use,  and,  hence. 
men  could  not  y/roCii  hv  borrowing. 
2S* 


330  OF    LEGAL    RATE:    OF    INTEREST. 

5.  And,  hence,  we  see  tliat  the  rate  of  interest  will 
be  always  affected  by  every  circumstance,  which  affects 
either  risk  or  profit  of  capital.  War,  or  the  rumor  of 
war,  by  increasing  the  risk,  raises  the  rate  of  interest  in 
property  afi'ected  by  it.  In  property  not  affected  by  it, 
the  same  cause  depresses  the  rate  of  interest ;  because 
it  diminishes  the  means  and  opportunity  for  produc- 
tion, and,  of  course,  diminisiies  the  profit  of  capital. 
On  ihe  other  hand,  the  discovery  of  any  new  mode  of 
profitably  employing  capital,  raises  the  rate  of  interest, 
hy  creating  an  increased  demand  for  capital. 

6.  And»hence,  again,  we  see  that  the  rate  of  interest, 
at  any  particular  time  or  place,  is  not  of  itself  any  indi 
cation  of  the  prosperity,  or  of  the  decline  of  a  country. 
The  indication  is  to  be  sought  for,  not  in  the  rate  of  in- 
terest, but  in  the  cause  by  which  that  rate  is  affected. 

1.  Whenever  the  rate  of  interest  is  raised  by  in- 
crease of  risk,  this  is  an  indication  of  adversity.  Rise 
of  interest,  from  such  a  source,  benefits  no  one.  It  is 
of  no  service  to  the  lender^  because  he  derives  no  profit 
from  that  part  of  the  premium  which  insures  him  against 
loss.  It  is  as  profitable  for  him  to  loan  for  five  per 
cent,  without  risk,  as  to  loan  for  ten  per  cent.,  when 
five  per  cent,  is  for  risk,  and  five  per  cent,  for  use.  It 
is  an  injury  to  the  borrower,  because,  one  hundred  dol- 
lars are  worth  no  more  to  him  when  he  pays  five  per 
cent,  for  risk,  than  when  he  pays  nothing  for  it.  What- 
ever, therefore,  is  paid  for  risk,  is  always  a  loss  to  both 
parties  ;  and  the  more  that  is  thus  paid,  the  worse  it  is 
for  both.  Hence,  the  rise  of  interest  caused  by  bad 
government,  civil  commotion,  revocations,  wars,  and  gen- 
eral immorality,  is  always  an  indication  of  national  de- 
cline ;  and  the  fall  of  interest,  produced  by  the  contrary 
causes,  is  an  indication  of  national  prosperity. 

2.  On  the  other  hand,  the  temporary  rise  of  mterest 
taused  by  increased  productiveness,  and  the  devel- 
opment of  new  national  resources,  is  an  indication  of 
national  prosperity.  It  shows  that  more  than  ordinary 
valuable  modes  of  employing  capital  have  been  discov- 
Rfed,  and,  that  men  can  afford  *o  pay  a  larger  price  foi 


OF    LEGAL    RATE    OF    INTERESl.  331 

the  use  of  capital.  I  have,  however,  called  this  a  tem- 
porary rise  ;  because,  a  rise  from  such  a  cause,  will  soon 
equalize  itself.  Increased  productiveness  will  soon  sup- 
ply capital,  or  it  will  be  imported  from  less  favored 
countries.  Thus,  in  new  countries,  the  rate  of  interest 
is  high  ;  but  this  is  by  no  means  an  indication  of  adver- 
sity, for  such  countries,  while  paying  so  high  a  rate  for 
capital,  yet  grow  rich  faster  than  those  from  which  they 
horrow. 

3.  Again  :  The  gradual  fall  of  the  rate  of  interest 
caused  by  the  diminution  of  risk,  and  the  greater  abun- 
dance of  capital,  is  an  evidence  of  prosperity.  I) 
shows  that  a  larger  proportion  of  the  means  of  subsis- 
tence is  falling  to  the  share  of  every  individual ;  thai 
every  man  can  more  easily  procure  capital  ;  and  that 
every  man,  in  order  to  support  himself,  produces  a 
larger  amount  than  formerly,  of  whatever  will  contribute 
to  the  comfort  and  convenience  of  his  neighbor. 

4.  On  the  other  hand,  the  fall  of  the  rate  of  intert'st, 
caused  by  u  suspension  of  the  means  of  production,  is 
an  evidence  of  national  adversity.  Suppose  a  war  to 
occur  betwsen  this  country  and  France.  The  capital 
now  employed  in  transportation,,  must  be  almost  wholly 
unproductive.  The  capital  employed  in  producing  our 
exports  to  that  country,  must  also  be  useless.  Hence, 
the  r^te  of  interest  would  fall  ;  for,  many  men  would 
have  iio  business  in  which  to  employ  their  capital.  The 
case  would  be  the  same,  were  a  fall  in  the  pric.e  of 
capital  to  proceed  from  civil  commotion,  or  any  similar 
causd.  And,  the  adversity  would  remain,  until  the 
cause  were  removed.  For,  if  capital  were  removed  out 
of  llje  coiuitry,  until,  from  reduction  in  the  supply,  the 
rate  of  interest  rose,  the  industry  of  the  country  would 
still  be  depressed,  until,  by  peace,  order,  and  good  gov- 
ernment, it  regained  its  natural  advantages. 

Hence,  we  see  that,  in  order  to  form  any  correct 
opinion  respecting  the  condition  of  the  country,  from  die 
[Present  rate  of  interest,  we  must  always  seek  for  the 
causes  of  that  rate,  instead  oC  deciding  from  the  mere 
rate  itself. 


OF    LEGAL    RATE    OF    INTEREST 

It  is  almost  unnecessary,  after  what  has  been  already 
advanced,  to  slate  that,  in  the  view  of  the  Political 
Economist,  laws  regulating  the  rate  of  interest  are  in- 
jurious to  the  prosperity  of  a  country.  Some  of  the 
rcjasons  for  this  opinion,  are  the  following  : 

1.  Such  laws  violate  the  right  of  property.  A  man 
has  the  same  right  to  the  market  price  of  his  capital,  in 
money,  as  he  has  to  the  market  price  of  his  house,  his 
horse,  his  ship,  or  any  other  of  his  possessions. 

2.  The  real  price  of  capital  cannot  be  fixed  by  law,  any 
more  than  the  real  price  of  flour,  or  iron,  or  any  other 
commodity.  There  is,  therefore,  no  more  reason  for 
assigning  to  it  a  fixed  value,  than  there  is  of  assigning  a 
fixed  value  to  any  oiher  commodity. 

3.  The  price  of  capital,  or  money,  is  really  more  va- 
riable than  that  of  any  other  commodity.  Most  other 
commodities  have  but  one  source  of  variation,  namely, 
use  or  prujit.  But  capital,  in  the  form  of  money,  is  li- 
able to  two  sources  of  variation,  risk,  and  use.  These 
va'-y,  at  different  times,  in  different  investments,  and  with 
different  individuals.  There  is,  therefore,  /ess  reason  why 
tlie  price  of  money  should  be  fixed  by  law,  than  why 
the  price  of  any  thing  else  should  be  so  fixed. 

4.  These  laws,  instead  of  preventing,  give  rise  to 
great  and  disastrous  fluctuations  in  the  price  of  money. 

Suppose  that,  to-day,  money  is  worth,  in  the  ordinary 
operations  of  business,  ten  per  cent.,  and  it  is  worth  six 
per  cent,  in  loan.  A  man  will  as  soon  loan  as  employ 
it  in  business,  if  he  possess  mere  than  he  wishes  t(j  use. 
There  will  then  be  a  fair  supply  of  money  in  the  market. 
Bu',  let  the  profits  of  capital  rise,  so  that,  in  the  ordi- 
nary operations  of  business,  capital  is  worth  twenty  per 
cent.  If,  now,  the  rate  of  interest  rose  with  this  in- 
creased rate  of  profit,  the  same  individuals  would  be  as 
willing  to  loan,  as  before  ;  and  thus,  the  supply  follow- 
mg  tl>e  demand,  there  would  arise  no  peculiar  scarcity. 
The  high  rate  of  interest  would  also  attract  capital  from 
abroad  ;  and  thus,  in  a  very  short  time,  it  would,  in  this 
particular  place,  be  brought  to  the  geneial  level. 

But  suppose  that  six  per  cent,  were  the  highest  legal 


OF    LEGiL    RATE    OF    INTEREST.  J^'J3 

rate  of  interest,  and  that  he  who  loaned  at  a  higlier  rate; 
was  liable  to  lose  both  his  principal  and  inierest,  and 
also  his  mercantile  character.  In  this  case,  as  soon  as 
the  profit  of  capital  in  business  rose  to  fifteen  or  twenty 
per  cent.,  no  one,  who  could  thus  employ  it,  would  loan 
it  at  six  per  cent.  Hence,  as  soon  as  it  thus  rose,  the 
supply  would  be  immediately  diminished  ;  and  this 
would,  of  course,  cause  a  greater  rise  of  interest.  Those 
who,  from  honor  or  conscience,  obeyed  the  laws,  woulJ 
withdraw  from  the  market,  and  employ  their  capital  in 
some  other  way  ;  and  no  one  would  loan,  but  those  who 
were  willing  to  risk  the  consequences  of  detection. 
These,  having  the  money  market  in  their  own  hands, 
will,  of  course,  charge  for  the  use,  and  for  the  risk  of 
detection  ;  and,  hence,  the  price,  in  a  few  days,  may 
become  doubled  or  trebled.  And,  at  the  same  time, 
although  the  real  value  of  money  may  be  fifteen  or 
twenty  per  cent.  ;  yet,  because  the  legal  price  is  six 
per  cent.,  there  is  no  inducement  for  capital  to  come  in 
from  abroad,  to  supply  the  demand.  Hence,  the  change 
in  the  money  market  has,  by  reason  of  this  law,  no  ten- 
dency whatever  to  regulate  itself. 

It  is,  I  presume,  needless  to  add,  that  such  laws  can 
never  be  enforced.  Men  in  want  of  money,  will  pay 
what  they  please  for  it,  and  those  who  choose  to  pay 
enough  for  it,  can  generally  borrow.  The  efl'ect,  then, 
of  the  usury  laws,  is  merely  to  drive  the  best  and  most 
conscientious  lenders  out  of  the  market,  or  else  oblige 
them  to  lend  by  means  of  subordinate  and  less  scrupu- 
lous agents.  For  this  agency  the  borrower  must  pay, 
and  hence  the  additional  rate  of  interest.  To  this  it  is 
objected,  that  money  is  not  like  other  things,  mas.uuch 
as  it  is  a  necessary  of  life  to  the  merchant,  and  therefore 
society  must  step  in  to  deliver  him  from  the  effects  of 
extortion.      To  th's  it  may  be  answered  as  follows  : 

1.  It  is  manifest  that  this  interference  does  not  render 
ihe  merchant's  condition  the  better,  but  rather  the  worse. 
Though  the  assistance,  therefore,  be  well  intended,  he 
may  very  well  dispense  with  it. 

2.  The  greater  the  necessity  of  money,  the  more 


1J4  NATURE    AND    PRICE    OF    STOCKS 

urgent  s  the  necessity  of  leaving  it  undisturbed  by  Jeeis 
Native  nterference.  It  makes  small  difference  to  the 
commun'ty,  whether  the  price  of  jewelry  be  fixed  by 
law  or  not.  But,  suppose  that  when  flour  would  bring 
ten  dollars  a  barrel,  the  government  forbade  it  to  be  sold 
for  more  than  seven  dollars.  Who  does  not  see  that 
the  flour  would  be  all  driven  away  and  the  people 
starved  ?  The  same  principle,  for  aught  1  see,  applies 
to  the  rate  of  interest. 

Hence,  I  believe  all  enactments  establishing  a  legal 
rate  of  interest,  are  injurious  and  unwise.  The  only 
enactment  of  any  value  would  be  one  which  should  de- 
fine the  usual  rate,  when  nothing  was  said  on  the  sub- 
ject in  the  contract.  The  use  of  this  would  be  to  pre- 
vent disputes.  This  is  always  an  advantage  to  both 
parties. 

I  shall  conclude  this  chapter,  with  a  few  remarks  on 
the  nature  and  price  of  stocks. 

I  have  already  remarked,  that,  when  a  company  is 
formed  for  any  purpose  requiring  capital,  and  yielding 
interest,  the  capital  is  divided  into  portions  called  shares, 
and,  that  any  one  has  a  right  to  subscribe  for  as  many 
of  these  as  he  pleases.  If  the  shares,  for  instance,  are 
one  hundred  dollars  each,  he  who  takes  one  share,  pays 
one  hundred  dollars,  and  so  of  any  other  number.  For 
every  share  he  receives  a  certificate  of  ownership,  and, 
so  long  as  he  owns  this  certificate,  he  is  a  member  of 
the  company  ;  he  is  entitled  to  the  same  rights  as  the 
rest ;  and  receives  his  portion  of  the  profit.  These 
certificates  are  called  stocks.  They  are  transferable, 
like  any  other  property,  and  the  owner,  as  in  any  other 
case,  sells  them,  if  he  wishes  to  do  so,  for  whatever  they 
will  bring.  The  owner,  for  the  time  being,  is  the  stock- 
holder ;  is  amenable,  in  his  proportion,  to  all  the  rules  of 
the  company  ;  and  is  entliled  to  his  proportion  of  all  the 
benefits  accruing  from  the  use  of  the  capital.  Such  is 
the  nature  of  bank,  insurance,  railroad,  canal,  and  other 
stocks 

The  same  principle   is   frequently   applied   to  loans 
Suppose  a  government  wishes  to  borrow  five  millions  o^ 


NATURE    AND    PRICE    Ot     STOCKS.  335 

dollars,  at  five  per  cent.,  for  twenty  years,  the  interest 
to  be  paid  quarterly.  The  conditions  of  the  loan  are 
specified,  and  subscription  books  opened,  in  different 
places  throughout  the  nation.  The  whole  sum  is  divided 
into  shares,  of  which  every  one  may  subscribe  for  as 
many  as  he  will.  Every  subscriber,  thus,  in  fact,  loans 
to  the  government,  on  the  terms  proposed,  as  much  as 
he  subscribes  for.  When  his  subscription  is  paid,  he 
receives  his  certificate,  which  contains  an  obligation  of 
the  government  to  pay  the  money  at  the  appointed  time, 
and  which  entitles  him  to  receive  the  interest  for  the 
sum  which  he  has  loaned,  at  the  rate  and  times  specified. 
These  certificates  are  also  called  stocks,  and  are  trans- 
ferable, like  any  other  property.  Hence,  they  are  an 
article  of  merchandise,  Uke  any  thing  else  ;  and,  as  per- 
sons are  wishing  both  to  buy  and  sell,  every  day,  the) 
are  every  day  bought  and  sold,  in  great  numbers,  in  all 
commercial  capitals. 

Now,  suppose  money  to  be  loaned  in  this  way  ;  it  is 
so  much  capital  a^  interest,  and  it  is  affected  by  the 
same  circumstances  as  other  capital  at  loan.  As  the 
convenience  of  investment  is,  however,  generally  the 
same,  the  rate  at  which  such  stocks  sell,  will  be  affected 
wholly  by  profit  and  risk. 

I .  Supposing  the  risk  to  be  the  same  ;  these  stocks 
are  affected  by  the  profit  annually  paid  on  the  invest- 
ment. Thus,  suppose  the  risk  to  be  nothing,  and  the 
common  rate  oi  interest  in  a  community  to  be  six  per 
cent.  If  I  own  a  share  equal  to  one  hundred  dollars, 
and  it  pay  six  per  cent,  interest,  this  share  will  always 
sell  for  one  hundred  dollars.  Suppose  that  the  ordinary 
rate  of  interest  being  the  same,  this  share  pays  twelve 
per  cent,  interest.  I  can  then  sell  it  for  two  hundred 
dollars  ;  because,  he  who  pays  two  hundred  dollars  for 
it,  will  receive  interest  at  the  rate  ofvsix  per  cent., 
which  is  as  much  as  he  would  receive  from  any  other 
investment.  On  the  contrary,  if  this  share  paid  but  three 
per  cent,  interest,  I  could  get  but  fifty  dollars  for  it ; 
since  three  dollars  is  the  interest  of  no  more  than  fifty 
dollars.      Thus,  other  things   being  equal,  the  price  of 


356  :»ATURE    AND    PRICE    OF    STOCKS 

Stocks  will  always  depend  upon  the  interest  which  the} 
pay  ;  and  they  will  always  sell  for  that  sum,  of  which 
the  dividend  which  they  pay  is  the  regular  interest. 

This,  however,  is  sometimes  affected  by  the  anticipa- 
tions of  men.  A  stock  which  pays  very  little  now,  may 
be  expected  to  pay  largely  at  some  future  time.  Its 
price  may,  therefore,  be  kept  up  by  this  circumstance. 
On  the  other  hand,  a  stock  may  pay  largely  now*,  but 
there  may  be  a  fear  that  it  will  soon  become  worthless ; 
this  will,  of  course,  depreciate  it  in  value. 

80,  also,  of  risk.  The  profit  of  stocks  being  the 
same,  their  price  is  inversely  as  the  risk.  If  a  stock 
pay  the  usual  interest,  but  is  in  danger  of  sinking  the 
principal,  it  will  be  depreciated  acordingly.  If  a  gov- 
ernment pay  good  interest  for  a  loan,  but  there  be  dan- 
ger that  it  will  be  overturned  by  a  revolution,  the  stock 
will,  of  course,  fall.  Thus,  insurance  stock  never  rises  to 
the  value  of  bank  stock,  when  it  pays  the  same  interest, 
on  account  of  the  greater  risk.  Thus,  also,  steamboat 
stock  may  pay  twenty  or  thirty  per  cent.,  and  yet  sell  at 
no  advance  ;  that  is,  it  will  be  at  par,  because  of  the 
danger  from  fire  and  other  accidents,  and  from  the  rapid 
wear  of  the  principal. 

It  is  by  circumstances  like  these,  that  the  prices  of 
stocks  are  determined.  When  a  stock  sells  for  what  it 
cost ;  that  is,  when  a  hundred  dollars'  worth  of  the  orig- 
inal capital  sells  for  one  hundred  dollars,  that  stock  is 
sj'id  to  be  at  par.  When  it  sells  for  more  than  this,  it 
is  said  to  be  above  par  ;  and  when  it  sells  for  less,  it  is 
said  to  be  beloic  par.  Thus,  if  stock  be  sold  for  thirty- 
seven  per  cent,  above  par,  a  share  that  cost  one  hundred 
dollars,  sells  for  one  hundred  and  thirty-seven  dollars  ; 
that  is,  one  hundred  dollars  receives  an  interest,  which, 
at  the  ordinary  rate  of  money,  is  as  much  as  one  hun- 
dred and  thirty-seven  dollars  would  receive.  And  so  of 
any  other  case. 

Now,  it  must  at  once  be  perceived,  that  the  opinion 
of  the  value  of  stocks  is  made  up  very  much  from  ex- 
pectations of  j)rofit  or  loss,  or  anticipations  of  increasp 
or  diminutiofi  of  risk.     Hence,  the  rumor  of  a  war  ;  o» 


NATURE    AND    PRICE    cF    STOCKS.  337 

the  failure  of  a  company,  or  of  a  bank  ;  of  the  probable 
insolveacy  of  a  government ;  or  the  news  of  the  gain  or 
loss  of  a  battle,  may  make  a  very  considerable  difieretice 
in  the  price  of  tbose  stocks  which  would  be  affected  by 
such  information.  Hence,  the  great  liability  to  fraud,  in 
all  the  operations  of  the  stock  market.  If  a  capitalist 
can  get  up  a  rumor  which  will  depress  any  stock  two 
per  cent.,  and  buy  one  hundred  thousand  dollars'  worth, 
during  this  depression,  he  may  sell  it  again  the  next  day, 
for  its  original  value,  and  thus,  in  the  course  of  twenty- 
four  hours,  realize  two  thousand  dollars,  without  either 
risk  or  trouble  ;  while  the  unfortunate  seller  is  cheated 
out  of  this  amount,  without  reason  and  without  remedy. 
I  do  not  say  that  all  rumors  affecting  the  price  of  stocks, 
are  thus  fabricated.  I  only  say,  that  such  is  the  liabil- 
ity ;  and  it  is  not  very  unlikely,  that  what  can  so  readily 
be  done,  has  actually  happened.  And  when  such  ru 
mors  actually  arise  without  collusion,  it  requires  great 
sagacity  to  judge  of  the  probability  of  their  truth,  and 
thus  to  buy  or  sell,  according  to  the  true  judgment  to  be 
formed  from  the  facts  actually  in  possession  of  the  com- 
munity. 

And,  besides  this,  another  method  may  frequently  be 
resorted  to,  for  the  sake  of  transferring  money  from  the 
pockets  of  one  class  of  citizens,  into  those  of  another 
class.  Suppose  a  particular  stock  to  be  worth  no  more 
than  fifty  per  cent.  ;  that  is,  to  be  capable  of  yielding  no 
more  than  three  per  cent,  on  the  original  interest.  Sup- 
pose there  be  only  two  or  three  hundred  thousand  dol- 
lars' worth  of  this  stock  in  the  market.  If,  now,  a  few 
ind  viduais  of  large  wealth  combine  together,  they  may 
easily  buy  up  the  whole  of  it,  at  this  reduced  pr>ce. 
The  scarcity  will  at  once  excite  inquiry,  and  will  leud 
lo  create  some  demand.  If,  now,  by  means  of  other 
agents,  they  put  small  quantities  of  it  into  the  market, 
and  buy  it  in  themselves,  at  gradually  increasing  prices, 
every  one  will  become  desirous  of  buying  this  stock, 
which,  for  a  succession  of  days,  has  been  rapidly  rising 
m  value.  By  careful  management,  it  may  thus  be 
raised,  in  a  few  days,  to  seventy-five  or  one  hundred 
29 


33S  MATURE    AND    PRICE    OF    STOCKS. 

dollai-s  per  share.  If,  then,  these  present  owners  care 
fully  keep  up  the  price,  by  buying  little  and.  selling 
much,  until  they  have  disposed  of  the  whole  of  their 
purchase,  they  will,  in  a  few  weeks,  find  themselves  to 
have  doubled  their  money.  In  the  mean  time,  the  cause 
of  this  rise  having  been  removed,  the  effect  ceases,  and 
the  present  holders,  who  have  purchased  at  seventy-five 
or  one  hundred  dollars  a  share,  find  that  their  slock  is 
worth  no  more  than  fifty  per  cent.  Thus,  fifty  dollars 
per  share,  is,  with  great  adroitness,  transferred  from  the 
pockets  of  the  many,  into  those  of  the  few,  and  many 
ar*)  ruined,  while  a  few  are  rendered  enormously  rich. 
I  again  say,  that  the  rise  and  fail  of  stocks,  are  not 
always  to  be  attributed  to  such  causes.  But,  every  one 
soon  sees  that  such  events  are  liable  to  happen.  Of  th(5 
honor  or  the  honesty  of  such  a  transaction,  it  is  not  ne- 
cessary here  to  speak.  We  will  only  take  occasion  to 
remark,  that  it  behooves  the  uninitiated,  who  wish  to 
escape  these  dangers,  to  be  somewhat  careful  how  they 
speculate  in  stocks. 


CHAPTER  THIRD. 

OF  THE  PRICE  OF  LAND,  OR  RENT. 

As  the  principal  demand  for  land,  is  for  the  purp)ses 
of  agriculture,  we  shall  first  consider  Rent,  specially 
with  reference  to  this  form  of  utility. 

iMnd  is  the  instrument,  by  which  the  farmer  produces 
(he  various  vegetable  and  animal  substances  which  be 
offers  in  exchange. 

Like  any  other  valuable  instrument,  it,  of  course, 
commands  a  price  according  to  its  productiveness.  He 
who  hired  a  loom,  would  pay  more  for  a  loom  with 
which  he  could  weave  twenty  yards  a  day,  than  for  one, 
with  which  he  could  weave  but  ten  yards  a  day.  The 
case  is  the  same  with  land. 

Now,  the  productiveness  of  land  is  made  up  of  two 
things  :   1st.   Fertility  ;  and,  2dly,  Situation. 

1.  Fertility.  We  all  know  that  the  productiveness 
of  different  soils  is  very  diverse.  Some  soils  will  pro- 
duce thirty,  or  forty,  or  fifty  bushels  of  wheat  to  the 
here,  while  others  will  produce,  at  the  cost  of  more 
labor,  not  more  than  ten  or  fifteen  bushels  to  the  acre. 
Some  soils  will  produce  the  most  valuable  vegetables  ; 
and  others,  only  the  most  common,  and  comparatively 
worthless.  Some  soils  will  produce  no  wheat  whatever  ; 
and  others  will,  without  manuring,  produce  a  luxuriant 
crop,  every  year.  Some,  wholly  unfit  for  tillage,  can 
be  used  only  for  grazing ;  and,  even  when  thus  em- 
ployed, yield  to  their  stinted  flocks,  bn'  a  meagre  sub- 
sistence. Hence,  we  see  a  reason  for  a  great  diversity 
in  the  price  of  land.  And  we  see,  at  once,  that  a  farmci 
might  more  profitably  pay  a  rent  for  one  farm,  than  oc- 
cupy another  farm  for  nothing. 

2.  Situation.  The  products  of  the  farmer  are  all 
bulky,  and,  of  course,  acquire  a  very  considerable  addi- 


340  PRICE  OF  LAND,  OR  RENT. 

tion  to  their  cost,  by  transportaiioii.  Hence,  if  A,  raise 
wheat,  within  a  mile  of  a  market  town,  and  sell  it  for  one 
dollar  a  bushel,  and  B,  live  one  hundred  miles  ofF,  and 
bring  his  wheat  to  the  same  market,  he  must  sell  it  at 
the  same  price.  The  nrjerchant  who  buys  wheat  can 
give  no  more  than  the  market  price  for  wheat,  whether 
it  have  been  raised  near  or  far  off.  It  is  no  more  valua- 
•^e  to  him,  for  having  been  brought  one  luindred  miles 
If,  now,  the  price  of  bringing  a  bushel  of  wlieat  one  hun 
dred  miles  be  fifty  cents,  B,  actually  receives  but  fifiy 
cents  a  bushel  for  his  wheat,  while  A,  receives  a  dollar. 
If  the  farms  of  both  were  of  equal  fertility,  that  is,  if 
both  produced  twenty  bushels  to  the  acre,  the  farm  of 
B,  would  be  only  half  as  productive  as  that  of  A  ;  that 
is,  he  would  receive  only  ten  dollars  per  acre,  while  A, 
received  twenty  dollars.  This  amount  of  difference  in 
situation,  would  be  the  same  as  a  difference  of  one  half 
m  fertility,  or  actual  productiveness. 

Hence,  fertility  being  the  same,  productiveness  will 
be  as  situation  ;  and,  situation  being  the  same,  produc- 
'iveness  will  be  as  fertility.  And  we  see,  that  these 
circumstances  wjll  always,  when  opposed,  counterbalance 
sdch  other ;  that  is,  land  at  such  a  distance  from  the 
market  that  it  cost  one  half  the  price  of  products  to 
transport  them,  will  be  of  the  same  value,  or  actual  pro- 
ductiveness, as  land  of  half  its  fertility,  -contiguous  to  a 
mirket.  And,  bence,  in  estimating  the  productiveness 
of  land,  these  circumstances  are  always  to  be  considered 
together.  And,  ,we  see,  that  land  of  the  greatest  fertil- 
ity may  be  so  far  from  a  market,  that  the  cost  of  trans- 
portation will  leave  a  profit  insufficient  to  repay  the  cost 
of  cultivation.  In  such  a  case,  such  land  will  be  worth 
nothing. 

With  these  principles  in  mind,  we  can  easily  see  i.i 
wliat  manner  rent  will  be  paid,  for  the  different  lands  m 
a  country. 

1.  In  the  first  settlement  of  a  country,  land  is  of  no 
exchangeable  value  ;  for  every  one  may  have  as  much  as 
he  pleases.  Every  one,  therefore,  being  at  liberty  to 
choose  for  himself   wili   select  such  a  portion  as  he  sup- 


PRICE  OF  LAND,  OR  RENT.  341 

poses  most  productive.  Under  these  circumstances, 
land  would  bring  no  rent ;  since  no  one  would  pay  anoth- 
er for  the  use  of  that  which  he  could  have  for  nothing. 
This  would  continue  to  be  the  case,  until  all  the  land  of 
the  first  qualiiy  was  occupied.  Let  us  suppose,  for  the 
sake  of  illustration,  that  this  first  quality  of  land  were 
capable  of  producing  one  hundred  bushels  to  the  acre, 
and  were  all  contiguous  to  the  place  of  settlement,  and 
thai  the  second  quality  of  land  were  capable  of  produc 
ing  but  eighty  bushels  to  the  acre. 

2.  Suppose,  now,  this  settlement  to  increase  so  rap- 
idly that  the  inhabitants  could  no  longer  be  supplied  with 
products  from  the  land  of  the  first  class  ;  or,  that  these 
products  were  in  such  demand,  for  the  purpose  of  ex- 
change with  other  countries,  that  these  lands  could  no 
longer  yield  the  requisite  supply.  The  price  of  grain 
would  rise,  so  that  a  farmer  could  support  himself  by 
lands  of  the  second  quality ;  and,  as  those  of  the  first 
quality  were  all  taken  up,  and  he  could  obtain  those  of 
the  second  quality  for  nothing,  he  will  proceed  to  occupy 
these.  Although  this  quality  of  land  would  bear  no 
rent ;  for  it  will  barely  support  him  ;  vet,  it  is  better 
than  starvation,  and  he  will  proceed  to  till  it.  But,  as 
soon  as  this  is  the  case,  the  lands  of  the  first  quality  will 
begin  to  command*  a  rent;  because,  it  is  as  well  for  a 
farmer  to  pay  twenty  bushels  a  year,  for  land  yielding 
one  hundred  bushels  an  acre,  as  to  have  land  producing 
only  eighty  bushels,  for  nothing.  And,  yet  more  :  As 
soon  as  land  will  pay  a  rent,  it  will  at  once  command  a 
price  ;  because,  if  a  man  wish  to  invest  capital,  he  will 
be  as  willing  to  pay  for  land  as  for  stocks,  or  any  thing 
else,  that  sum,  of  which,  at  the  ordinary  rate  of  profits, 
(he  rent  would  be  the  interest.  Thus,  if  land  pay  six 
dollars  a  year  rent,  per  acre,  if  money  be  at  six  per  cent 
interest,  it  is  worth  one  hundred  dollars  an  acre  ;  since 
sfix  dollars  is  the  interest  of  one  hundred  dollars.  And 
so,  if  the  occupier  have  the  capital,  it  is  as  cheap  for 
him  to  buy  the  land,  and  receive  the  interest  himself,  a* 
to  hold  the  money  himself,  and  pay  the  interest  to  another. 

3.  Suppose,  now,  the  price  of  grain,  either  f^r  home, 

29* 


342  PRICE    OF    LAiND,    OR    RE>T. 

or  for  foreign  consumption,  to  have  risen  so  tnuch,  thai 
the  lands  of  the  third  quality,  or  producing  sixty  busnels 
per  acre,  could  now  be  tilled,  and  support  the  agricul- 
turist. As  soon  as  this  became  the  case,  lands  of  tlie 
second  quality  would  yield  a  rent  and  would  bear  a  price  ; 
because,  it  would  be  as  profitable  for  a  farmer  to  pay 
twenty  bnjshels  a  year  for  land  of  eighty  bushels,  as  to 
cultivate  land  of  sixty  bushels  for  nothing.  And,  as 
soon  as  land  of  the  second  quality  brought  a  rent,  the 
rent  of  land  of  the  first  quality  would  also  sustain  a  cor- 
responding rise.  It  would  be  as  cheap  for  a  farmer  to 
pay  forty  bushsls  a  year  for  land  of  one  hundred  bushels 
as  twenty  for  land  of  eighty  bushels,  or  as  to  have  land 
of  sixty  bushels  for  nothing. 

4.  It  is  evident,  that  as  the  settlement  of  the  country 
advanced,  rent  and  the  price  of  land  would  go  on  aug- 
menting, according  to  these  principles.  Land,  which 
will  merely  support  the  cultivator,  will  bear  no  rent. 
But,  all  land  of  a  greater  productiveness  than  this,  will 
yield  some  rent  ;  and,  this  rent  will  be  precisely  as  its 
productiveness  exceeds  that  of  the  poorest  soil  which  is 
worthy  of  cultivation.  And,  so  soon  as  any  soil  is  tilled 
of  a  poorer  quaJtty  than  any  which  was  tilled  previously, 
all  the  soils  of  a  better  quality  will  rise  in  rent,  and  in 
price  accordingly. 

5.  Suppose  the  land  of  any  nation  to  be  limited  by 
situation,  or  by  territorial  lines  ;  it  is  evident  that  the 
demand  for  food,  increasing  with  the  increase  of  the 
number  of  inhabitants,  the  land  would,  in  time,  be  all 
occupied.  As  soon  as  the  poorest  land  was  capable  of 
yielding  something,  besides  supporting  its  inhabitants,  it 
would  also  pay  rent.  And  thus,  as  before,  the  price 
and  the  rent  of  land  would  go  on  increasing,  until  it  was 
arrested  by  some  counteracting  cause.  Such  causes  are 
the  following  :  If  the  grain  were  exported,  its  rise  of 
price  would  gradually  limit  the  foreign  consumption  ; 
since  other  nations  would  begin  either  to  raise  it  them- 
selves, or  to  procure  it  elsewhere.  Or,  if  trade  were 
free,  as  soon  as  its  price  rose  so  high  that  the  nation 
itself  could  procure  its  supplies  cheaper  abroad  than  at 


PRICE    OF    LaNO,    or    KENT.  343 

home,  it  would  import  instead  of  raising  it.  As  soon  as 
this  became  the  case,  the  price  of  grain  would  rise  no 
higher  ;  and,  at  whatever  rate  of  rent  this  kind  of  land 
may  have  been  when  this  change  took  place,  from  this 
time  it  would,  at  that  rate,  remain  stationary. 

6.  It  is,  however,  to  be  observed,  that  this  elFect 
upon  the  occupation  of  land,  would  be  rather  a  cl  ange 
in  the  manner  of  use,  than  in  the  utility  of  the  land  itself. 
It  is  evident  that  it  could  affect  the  demand  for  land, 
only  for  the  production  of  those  commodities  that  are 
capable  of  distant  transportation,  such  as  bread  stuffs  in 
general.  But  a  very  large  part  of  the  productions  of  the 
earth  are  not  capable  of  such  transportation  ;  such  are 
butcher's  meat,  which  forms  so  large  a  portion  of  the 
food  of  man ;  green  vegetables  ;  milk  and  butter ;  and 
the  food  of  animals,  both  for  slaughter  and  labor.  Just 
in  proportion  as  a  population  increases,  the  demand  for 
all  these  will  increase  likewise.  Hence,  it  is  reasonable 
to  suppose,  that  although  the  importation  of  foreign  grain 
checked  the  growth  of  domestic  grain,  the  increased  de- 
mand for  these  other  domestic  products,  would  keep  the 
prices  of  land  in  a  state  of  progressive  increase. 

Besides.  It  is  evident  that  the  demand  for  these  re« 
cent  and  untransportable  productions  of  the  earth,  must 
be  in  proportion  to  the  number  and  the  wealth  of  the 
population.  We  have  already  shown,  that  the  number 
of  the  population  must  be  as  the  means  of  subsistence. 
Hence  the  cheaper  grain  and  bread  stuffs  are,  the  more 
rapid  will  be  the  increase  of  population,  and  the  greater 
will  be  the  demand  for  those  products,  of  which  the 
agriculturist  at  home  must,  from  his  locality,  enjoy  the 
monopoly.  Hence  it  may  reasonably  be  doubted 
whether  the  corn  laws  of  Great  Britain,  of  which  the 
object  is,  to  keep  up  the  price  of  land,  and  to  sustain 
th'i  agricultural  interest,  have  really  had  this*  effect ;  and. 
whether  they  have  not,  in  reality,  had  the  contrary  effect. 
Had  the  price  of  corn  been  as  low  as  it  might  have  been, 
for  the  last  fifty  years,  but  for  the  duties  on  imported 
grain,  the  populat/'on  of  Great  Britain  would  have  been 
probably  doubled    both  from  the  greater  cheapness  of 


S>t4  PRICE    OF    LAND,    OR    RENT. 

living,  and  also  from  the  stimulus  given  to  her  manufac- 
tures, by  the  diminished  price  of  all  her  products,  and  the 
demand  for  her  manufactures  to  pay  for  the  corn  that  she 
miported.  In  this  case,  the  increased  demand  for  all 
the  recent  productions  of  the  earth,  would  have  been 
more  than  equal  to  all  the  benefit  which  even  the  agri- 
culturist is  supposed  to  have  reaped,  from  the  exclusio' 
of  foreign  bread  stuffs.  If  this  be  so,  it  is  another  illus- 
tration of  the  universal  law,  that  a  selfish  policy  always  in 
the  end  defeats  itself;  and  reaps  its  full  share  of  the 
gratuitous  misery  which  it  inflicts  upon  others. 

7.  From  the  view  which  has  been  taken,  it  would  at 
first  seem,  that  the  point  of  earliest  settlement-  of  a  coun- 
try, or  at  least  its  maritime  frontier,  would  be  its  centre, 
where  land  would  be  of  the  highest  price  ;  while  all  the 
lands  of  the  interior,  in  proportion  as  they  receded  from 
It,  would  gradually  decrease  in  value,  until  the  cost  of 
transportation  of  products,  at  last  reduced  their  value  to 
nothing.  Such  would  be  the  case,  were  it  not  for  vari- 
ous circumstances,  which  greatly  modified  this  result. 
Some  of  these  modifying  circumstances,  it  is  important 
to  notice. 

1.  As  a  people  are  thus  spread  over  a  large  territory, 
and  are  devoted  to  agriculture,  it  becomes  necessary  that 
other  persons  should  devote  themselves  to  manufactures, 
and  to  barter  and  sale.  Those  who  are  thus  employed, 
by  necessity  collect  together,  into  towns  and  villages. 
Thus  a  large  population  is  collected,  which  raises  noth- 
ing from  the  earth  ;  and  hence,  their  wants  must  be  sup- 
plied by  the  agriculturists  in  their  neighborhood.  Hence, 
immediate  markets  for  produce,  are  created  in  every 
district  ;  that  is,  although  the  farmer  cannot  remove  hb 
farm  nearer  to  the  market,  the  market  has  removed  near- 
er to  hini ;  and  the  diminution  of  distance  has  increased 
the  productiveness  of  his  farm,  as  much  as  though  its 
fertility  had  been  increased,  or  it  had  been  removed  to 
the  sea-board.  It  is  not  fifty  years,  since  land  in  the 
vicinity  of  Utica,  New  York,  was  valuable  only  for  rais- 
ing produce,  which  was  sent  to  the  city  of  New  York, 
by  the  wa}'   of  Albany ;  and  the  rent,  and  consequent 


PRICE  OF  LAND,  OR  RENT.  345 

price  oi  land,  depended  on  what  could  be  made  by  a 
harvest,  after  deducting  from  the  market  price  of  wheat, 
in  New  York,  the  cost  of  transportation  between  the 
two  places.  But,  while  the  land  has  remained  unmoved^ 
population  has  moved  toward  it ;  and  Utica  itself  is  a 
populous  city,  demanding,  for  its  suppli»s,  the  produc- 
tions of  all  the  surrounding  country  ;  so  that  land,  in  its 
vicinity,  bears,  1  presume,  a  very  considerable  propor 
tion  to  the  price  of  land  in  the  vicinity  of  the  city  of 
New  York  itself. 

2.  I  have  mentioned  abo\'e,  that  productiveness  of 
land,  depended  not  only  on  fertility^  but  also  on  situa- 
tion, or  facility  of  a  communication  with  a  market.  Fer- 
tility being  given,  productiveness  will  be  as  situation  ; 
that  is,  the  greater  the  ease  of  transportation,  the  greater 
the  actual  productiveness  ;  and,  of  course,  the  higher 
the  value  of  land.  Thus,  if  land  produce  one  hundred 
bushels  per  acre,  and  it  costs  half  its  market  price  to 
convey  it  to  the  place  of  sale,  it  is  only  as  valuable  as 
land  of  half  its  fertility,  contiguous  to  the  market.  If, 
then,  the  cost  of  transportation  can  be,  by  any  means, 
reduced,  the  productiveness  of  lands,  affected  by  this 
reduction,  will  rise  in  proportion.  If,  when  the  price 
of  wheat  is  a  dollar,  it  cost  fifty  cents  to  transport  it, 
and  the  cost  of  transportation  can  be  reduced  to  twenty- 
five  cents,  it  is  as  good  to  me,  as  if  the  price  had  been 
raised  twenty-five  cents,  or  my  land  had  increased  fifty 
per  cent,  in  fertility.  Now,  in  the  progress  of  a  coun- 
try, great  improvements  are  generally  effected  in  roads, 
and  the  ordinary  modes  of  transportation,  by  which  the 
value  of  the  lands  at  a  distance  is  generally  enhanced. 
This  result  ig,  however,  signally  effected  by  canals  and 
railroads.  The  effect  of  these  means  of  transportation 
is,  to  raise  the  prices  of  products  in  the  mterior,  and,  of 
course,  the  price  of  land  in  general,  in  the  nianner  above 
stated.  A  very  intelligent  gentleman  of  Geneva,  New 
York,  informed  me,  that  in  thf  year  1821,  the  price  of 
wheat  in  that  town  was  thirty-one  cents  per  bushel.  In 
1822,  the  price  was  thirty-seven  and  a  half  cents.  The 
canal  was  opened  during  the  next  year,  and  it  rose  to 


346  PRICE  OP  LAND,  OR  RENT. 

sixty-two  and  a  half -cents.  It  has  never  since  fallen  be 
low  this  latter  price,  and  at  the  time  of  the  conversation, 
1835,  it  was  selling  at  one  dollar  and  thirty-one  cenw 
per  bushel  The  price  of  land,  of  course,  has  arisen  iii 
proportion.  And  this  change  has  been  for  the  benefit 
of  all  parties.  The  farmer  is  greatly  enriched,  the  la- 
borer is  better  paid,  a  greater  number  of  persons  are 
very  profitably  employed  and  supported  by  labor  on  the 
canal,  and  wheat  has  been  sold  at  a  lower  price  to  the 
consumer,  than  ever  before. 

So  far  as  we  have  treated  of  this  subject,  we  have 
considered  the  fertility  of  land,  as,  on  an  average,  equal  ; 
and  the  facility  of  communication  gradually  diminishing, 
with  the  increase  of  the  distance.  Under  these  circum- 
stances, it  is  manifest,  that  the  price  of  land,  in  the  inte- 
rior, could  not  rise,  unless  the  price  of  land  on  the  sea- 
board had  first  risen.  And,  as  land  came  into  market, 
further  and  further  from  the  old  settlements,  it  would  al- 
ways indicate  a  rise  of  price  in  the  land  which  had  first 
been  cultivated  ;  or  in  the  most  favorable  localities. 

But  it  is  manifest  that  the  case  may  be  far  otherwise. 

1.  The  land  in  the  interior  may  be  the  most  fertile, 
and  may  enjoy  the  most  favorable  climate.  The  in- 
creased fertility,  will,  of  course,  counterbalance  within  a 
certain  limit,  the  inconvenience  of  situation  ;  and  mild- 
ness of  climate,  will  render  a  less  exertion  necessary  to 
procure  the  rfjcessary  provisions  for  the  sustentation  of 
animal  life.  Hence,  the  profit  of  labor  will  be  greater, 
and  the  difference,  in  these  respects,  may  be  such,  as  to 
counterbalance  entirely,  within  a  given  distance,  the  dis- 
advantages of  position.  In  this  case,  the  interior  will  be 
(Settled  without  advancing  the  price  of  land  on  the  sea- 
hoard.  The  advantages  of  both,  though  dissimilar,  are, 
so  far  as  productiveness  is  considered,  equal ;  and,  of 
".ourse,  there  is  no  reason  why  any  one  should  pay  any 
t^hing  for  a  choice. 

And,  secondly,  as  I  have  shown  before,  the  difficulty 
of  transportation  may  be  so  reduced,  that  it  forms  but  a 
small  part  of  the  cost  of  whatever  is  raised  in  the  inte- 
rior.     When  ii  costs  but  a  few  cents  more  a  bushel,  to 


PRICE  OF  LAND,  OR  RENT.  347 

transport  wheat  three  hundred  miles,  than  fifty  miles,  and 
ihe  fertility  of  land  three  hundred  miles  from  tfle  market, 
IS  twice  as  great  as  that  in  the  vicinity,  it  is  evident,  that 
I  he  productiveness  of  land  three  hundred  miles  off,  will 
be  greater  than  of  that  only  fifty  miles  from  the  market 
Hence,  the  price  of  the  one  might  rise,  without  produc 
ing  a  rise  in  the  price  of  the  other.  Nay,  it  is  evident, 
that  it  might  produce  a  contrary  effect.  If  a  farmer  in 
the  interior  could  raise  wheat  at  a  fair  profit,  and  bring 
it  to  market  for  one  dollar  a  bushel,  and  the  farmer  in 
the  neighborhood  of  the  market  could  not,  at  a  fair  profit, 
sell  it  for  less  than  one  dollar  and  twenty-five  cents,  as 
the  latter  must  sell  his  wheat  at  the  current  price,  of 
course,  he  could  not  raise  it  at  all.  Hence,  as  a  source 
of  profit  is  cut  off,  the  annual  produce  is  less,  and  the 
price  of  land  will  fall. 

Such  has  been,  to  some  extent,  the  course  of  events 
in  this  country.  The  lands  on  the  sea-board  were  first 
settled,  and  cultivation  gradually  extended  to  the  west. 
At  first,  the  average  fertility  of  the  lands  newly  occupied, 
was  no  greater  than  that  of  those  first  cultivated  ;  and 
the  price  of  the  old  lauds  rose,  as  the  new  lands  were 
occupied.  By  degrees,  cultivation  passed  over  the  Al- 
leghany mountains,  and  entered  the  Valley  of  the  Missis- 
sippi. Here  the  soil  is  exuberantly  fertile,  and  the  cli- 
mate mild  ;  but,  the  difficulty  of  communication  with  the 
interior,  operated  as  a  severe  check  upon  the  growth  of 
the  new  States,  and  the  price  of  lands  in  the  old  Slates 
was  not  materially  affected.  As  soon,  however,  as  the 
use  of  steam  opened  the  navigation  of  the  Mississippi, 
the  whole  scene  was  changed.  The  inland  Stales  be- 
came, in  position,  almost  sea-board  States.  Their  ei 
tility  was  relieved  from  the  inconveniences  of  position, 
under  which  it  had  formerly  labored  ;  and  the  produc* 
tions  of  a  new  and  rich  soil  could  be  brought  to  market, 
with  as  little  cost  for  transportation,  as  that  of  land^ 
within  one  or  two  hundred  miles  from  the  sea-board 
The  result  has  been,  that  the  western  farmers  have  un- 
dersold the  farmers  of  the  north  and  east  ;  and  now, 
but  little  wheal  is  raised  in  any  part  of  New  England 


$48  PRICE  OF  LAND,  OR  RENT. 

This  result  has  been  increased,  by  the  vast  eniigratioii 
to  the  west,  which  has  diminished  tlie  number  ot  labo- 
rers ;  and  by  demand  for  laborers  at  the  east  for  man- 
ufactures and  internal  injprovements,  which  has  with- 
drawn men  from  agriculture,  and  raised  the  wages  of  ag- 
ricultural labor  in  the  New  England  States.  Hence,  b} 
ihe  increased  wages  of  labor,  and  the  reduced  pricf  of 
grain,  the  profit  of  agriculture  has  been  reduced,  and  the 
price  of  land  has  fallen.  I  suppose  that  land,  at  present, 
in  New  England,  for  the  ordinary  purposes  of  agricul- 
ture is  not  generally  as  dear  as  it  was  twenty  or  thrty 
years  since. 

Yet,  it  by  no  means  follows,  that  this  depreciation  will 
increase.  The  settlement  of  the  Western  States  creates 
a  vast  market  for  manufactures,  and  a  vast  demand  for 
mercantile  exchanges.  These  require  capital,  which  is 
more  abundant  in  the  older  States.  The  older  States, 
also,  have,  by  nature,  greater  facilities  for  such  employ- 
ments. Hence,  the  Western  States  will  become  their 
customers,  and  the  older  States  will  become  thickly 
peopled  with  a  manufacturing  and  mercantile  population. 
Land  will  be  in  demand,  for  supplying  the  immediate 
wants  of  such  a  population,  and  it  will  probably  again 
soon  rise.  Each  manufacturing  establishment  will  be- 
come a  centre,  which  will  confer  a  high  value  on  land 
in  its  immediate  vicinity.  By  the  multiplication  of  such 
centres,  the  price  of  the  whole  will  be  augmented. 

I  have  thus  far  considered  the  price  of  land,  only  in 
so  far  as  its  mere  productiveness  is  concerned.  'J'his 
will,  of  course,  be  the  most  ordinary  and  general  cause 
of  the  variation  in  its  price,  and  in  its  rent.  There  are, 
however,  other  circumstances,  which  have  a  materia] 
efl'ect  upon  its  value,  even  in  the  same  country,  and  un- 
der substantially  the  same  laws. 

1 .  Beauty  of  situation.  Of  two  farms  equally  pi  o- 
,ductive,  many  men  would  give  a  decided  preference  to 
that  which  commanded  a  view  of  the  richest  and  most 
beautiful  prospect,  or  of  which  the  trees  and  shrubbery 
wore  so  arranged,  as  to  give  the  greatest  pleasure  to  the 
beholder       For  this   preference,  most   men   would    be 


PRICE  OF  LAND,  OR  RENT.  349 

infilling  to  pay  a  considerably  additional  price.  This  ad- 
ditional price  will  increase  with  the  wealth  and  the  im- 
proving tastes  of  the  community.  This  is  a  circum- 
stance which  should  always  be  borne  in  mind  by  the 
occupiers  and  owners  of  land.  It  costs  but  little  more 
labor  to  lay  out  an  orchard  regularly  and  beautifully, 
than  to  lay  it  out  irregularly  and  clumsily.  It  costs 
nothing  to  let  a  tree  stand,  where  it  adds  beauty  to  a 
prospect,  and  it  costs  very  little  to  plant  one,  where  it 
will  have  the  same  effect.  A  neat  and  convenient  house, 
consumes  neither  more  lumber,  nor  nails,  nor  labor,  than 
a  slovenly  and  inconvenient  one.  And  yet,  on  these 
differences,  very  much  of  the  exchangeable  value  of  j» 
farm  depends. 

2.   The  price  of  land  depends  much  on  the  intellectu- 
al and  moral  character  of  a  neighborhood. 

Of  two  farms  of  equal  productiveness,  but  in  very  dis- 
similar moral  and  intellectual  communities,  almost  every, 
one  would  prefer  tha^  which,  in  these  respects,  possess 
ed  the  greater  advantages.  A  man  who  has  in  any  de- 
gree cultivated  his  own  intellect,  prefers  the  society  of 
those  whose  intellects  are  also  cultivated.  A  parent 
would  always  prefer  a  neighborhood  in  which  his  children 
would  receive  the  advantages  of  education.  A  man  who 
<iad  been  accustomed  to  religious  observances,  would 
choose  to  remove  where  he  could  enjoy  the  benefits  of 
religious  instruction.  And  every  man,  let  his  disposi- 
tions be  what  they  may,  will  choose  to  reside  in  a  neigh- 
borhood, in  which  the  moral  character  of  the  people  is  a 
protection  from  dishonesty  and  robbery  ;  and  where  his 
children  will  be,  as  little  as  possible,  exposed  to  the 
contamination  of  vice.  It  is  manifest,  that  each  of  these 
considerations,  would  form  a  ground  of  preference  for 
one  situation  over  another,  and  for  this  preference,  every 
reasonable  man  would  be  willing  tr  pny.  Were  two 
farms  thus  differently  situated,  there  would  be  many 
more  buyers  for  the  one  than  for  the  other,  and  the  ad- 
vantage would  all  be  on  the  side  of  the  most  intelligent 
and  moral  community. 

Uence  we  see,  that,  besides  the  advantages  which  in- 
30, 


350  PRICE  OF  LAND,  OK  RENT, 

telligence  and  virtue  confer  upon  the  character  of  a  peo 
pie,  there  is  also  an  additional  advantage,  in  the  increas 
ed  value  of  property  which  they  produce.     It   may  be 
fairly  questioned,  whether  this,  of  itself,  be  not  sufficient 
to   repay  the  whole  expense  of  literary  and  religious  in- 
stitutions.     There  are  towns  in  New  England   in  which, 
w  ithin  a  few  years,  the  price  of  real   estate  has  doubled, 
i    foi   no  other  assignable   reason,  than  that  of  the  literary 
/C  I    and  moral  advantages   which   they  hold  out  to  residents. 
I     This  mode  of  increasmg  the  value  oi  property,  seems  to 
me  deserving  of  more  attention  than  it  has  generally  re- 
ceived. 

Land  is  used  for  other  purposes  besides  residence  and 
agriculture.     The  principles  'jpon  which  its  value  is  de- 
termined, in   such  cases,  are  substantially   the  same  as 
,  those  mentioned  above. 

1 .  Thus,  in  cities,  land  for  the  erection  of  buildings 
•has  a  two  fold  value ;  1st,  for  dwelling  houses;  and, 
2dly,  for  ware  houses,  and  places  ^or  the  transaction  of 
business.  Its  value,  in  both  of  these  respects,  depends 
not  on  fertility,  as  it  is  not  wanted  for  cultivation,  but 
wholly  on  situation.  A  man  needs  a  house  which  will 
furnish  the  necessary  conveniences  for  his  family.  He 
also  wishes  one,  within  a  convenient  distance  from  his 
place  of  employment.  The  further  his  dwelling  is  re- 
moved from  his  shop  or  his  counting  room,  the  longer 
time  is  occupied  in  passing  from  the  one  to  the  other,  and 
the  less  are  the  conveniences  of  his  residence.  Hence, 
he  will  be  willing  to  pay  for  the  choice,  and  thus  the 
price  of  land  gradually  diminishes  from  the  centre  to  the 
circumference  of  a  thickly  settled  town. 

But,  in  a  place  of  mercantile  business,  edifices  have 
another  value,  besides  that  of  dwelling  houses.  They 
are  needed  for  the  transaction  of  business.  Where  many 
exchanges  are  to  be  made,  in  the  course  of  a  few  hours, 
every  day,  it  is  of  importance  that  the  exchangers  should 
be  as  near  together  as  possible.  And,  where  a  large 
number  of  strangers  is  daily  collected  for  the  sake  of 
making  purchases,  it  is  important  to  the  seller,  to  be  so 
situated  as  to  be  in   their  immediate  vicinity.     A   mer 


PRICE    OF    LAND,    OR    RE.NT.  35l 

i>  ant  whose  store  is  in  the  centre  of  business,  can  easily 
sell  ten  times  as  much  in  a  day  as  one  who  is  half  a  mile 
off  from  the  centre.  Hence,  he  is  able,  from  the  mere 
fact  of  difference  in  situation,  to  realize  a  much  greater 
annual  profit  in  the  one  place  than  in  the  other.  Foi 
this  difference  of  productiveness,  he  will  be  wiUing  to 
pay  a  price  ;  and,  hence,  in  large  cities,  the  most  cen- 
tral situations,  or,  as  they  are  called,  the  best  stands  for 
business,  command  a  very  high  rent  ;  and  a  correspon 
dent  price.  A  few  square  feet  of  land  in  the  centre  of 
the  city  of  New  York,  will  sell  for  more  than  many  acres 
of  the  most  productive  soil  in  any  part  of  the  Union 
And,  as  the  price  of  land,  in  such  cases,  is  owing  entirely 
to  the  demand  for  the  purposes  of  facilitating  trade,  it 
can  only  rise  with  the  increasing  prosperity  of  the  place. 
Hence,  the  rise  or  fall  of  real  estate,  in  any  town,  if  it 
be  truly  a  rise  in  value,  and  not  a  rise  from  speculation, 
is  one  of  the  surest  indications  of  its  mercantile  prosper- 
ity, or  of  the  reverse.  And,  moreover,  the  rise  of  rents, 
in  any  given  place,  proceeds  upon  the  same  principles  as 
those  which  we  have  already  illustrated.  Suppose  the 
places  of  business,  in  a  town,  to  be  all  occupied,  with- 
in a  given  circle,  and  that  they  are  sufficient  for  the  ac- 
commodation of  all  the  merchants  who  need  them.  If 
the  town  be  prosperous,  in  five  years,  these  accommo- 
dations will  be  insufficient,  and  buildings  without  this 
circle  will  come  into  demand  for  this  purpose.  Their 
rent,  in  consequence  of  this  additional  value,  will  rise. 
But  this  rise  will  be  accompanied  by  a  rise  in  the  rent 
of  the  more  favored  situations.  Those  persons,  whose 
employment  requires  a  central  situation,  will  occupy  the 
centre,  at  a  price  which  will  exclude  those  to  whom 
such  a  situation  is  less  essential,  and  this  process  will  go 
on,  until  those  who  are  the  least  able  to  come  into  com- 
petition, pass  out  of  the  original  circle,  and  thus  create 
k  new  demand,  and  raise  the  price  of  rent  as  it  has  been 
before  suggested. 

2.  Land  frequently  possesses  an  additional  value,  ii 
consequence  of  its  proximity  to  waterfalls.  A  water- 
rail  provides  for  the  manufacturer^  a  constant  supply  o' 


35i  RENT    OF    MINGS. 

momentum,  which  he  can  tue  by  means  of  very  simple 
machinery.  Suppose  the  interest  of  capital  employed 
m  the  construction  of  furnaces,  and.  steam  machinery, 
and  the  annual  expense  for  fuel  and  attendance  in  a 
§iven  situation,  were  one  thousand  dollars,  and  the  same 
power  could  be  procured  at  the  same  place,  by  ap- 
propriating a  waterfall,  by  means  of  machinery,  of  which 
the  interest  was  no  more  than  one  hundred  dollars  ;  the 
labor  of  the  waterfall  would  be  worth  nine  hundred  dol- 
lars per  year.  Hence,  supposing  it  to  be  in  a  situation 
in  which  there  was  a  demand  for  this  power,  the  land 
which  gave  the  legal  right  to  the  use  of  it,  would  possess 
a  value  proportioned  to  the  value  of  the  power.  Of 
course,  the  price  which  it  would  command,  would  de- 
pend upon  the  annual  value  of  the  privilege.  This 
would  be  determined  by  the  amount  of  applicable  pow- 
er, and  by  the  situation.  A  power  sufficient  to  move  a 
dozen  mills,  would  be  twelve  times  as  valuable,  as  that 
which  could  move  only  one.  A  water  power  near  the 
sea-board,  would  be  much  more  valuable  than  one  in  the 
interior.  If  it  were  at  tide  water,  its  annual  value  wDuld 
be  equal  to  the  difference  between  its  annual  expense 
and  that  of  steam.  If  it  were  at  a  distance  from  tide 
water,  or  the  market,  it  would  be  equal  to  this  differ- 
ence, minus  the  expense  to  be  incurred,  in  the  trans- 
portation of  the  material  and  of  the  maniifactured  fabric. 
As  soon  as  the  cost  of  transportation  was  equal  to  the  dif- 
ference of  expense  between  the  two  modes  of  producing 
power,  it  would  become  valueless  ;  because  it  would  be 
as  cheap  to  erect  a  manufactory  at  tide  water,  and  pay 
the  expense  of  building  and  fuel,  as  to  have  the  power 
for  nothing,  and  pay  the  same  expense  for  transporta- 
tion. Hence,  in  the  erection  of  mills  and  the  establish- 
ment of  manufactures,  both  of  these  circumstances  are 
to  be  maturely  considered,  before  a  situation  is  decided 
upon.  For  want  of  such  consideration,  much  property 
has  been  totally  lost. 

3.  J^Iines.  These  depend  upon  the  same  principles 
as  those  which  have  been  already  illustrated.  A  wafei 
privilege  is  a  mine  of  power,  a  bed  of  ore  is  a  mine  of 


RENT    OF    AlINES.  SftS 

metal.     The  firmer  is  frequently  tjie  most  valuable  pos- 
3*»ssion. 

Suppose  a  farm  to  be  worth  the  ordinary  price  of 
and  ;  and  the  owner  discovers  on  it  a  bed  of  iion  ore, 
which,  after  deducting  the  necessary  expenses  of  work- 
ing it,  and  paying  the  labor  and  skill  necessary  to  the 
operation,  will  yield  one  thousand  dollars  a  year.  The 
farm  or  the  land  necessary  for  the  mining  operations, 
will  rent  for  one  thousand  dollars  a  year,  or  will  sell  for 
such  a  sum  as  will  yield,  at  the  ordinary  rate,  one  thou- 
sand dollars  as  interest.  In  this  case,  it  is  manifest  that 
the  original  owner  of  the  property  will  be  a  gainer  by  the 
discovery,  to  the  full  amount  of  the  increase  in  the  price 
of  his  land.  But,  here,  the  peculiar  gain  ceases.  To 
other  holders  who  may  come  after  him,  it  is  merely  an 
investment,  of  the  same  nature  as  any  other  invest- 
ment ;  and  will  yield  no  more  than  the  ordinary  rate  of 
profit. 

The  case  is  the  same  with  a  copper,  a  silver,  or  a 
gold  mine.  *  The  owner  of  the  land  at  the  time  of  the 
discovery,  becomes  greatly  enriched,  in  consequence  of 
this  new  product,  which  may  be  derived  from  his  prop- 
erty. But,  after  this  rise,  when  a  new  purchaser  comes 
into  possession,  the  peculianty  of  the  gain  ceases.  A 
rich  gold  mine  will  rent  or  will  sell  for  more  than  a  poor 
one,  and  its  price,  or  its  rent,  will  be  in  exact  propor 
lion  to  its  productiveness,  just  as  a  farm,  a  mill  privi- 
lege, or  any  other  property.  It  is  a  somewhat  remark- 
able fact,  that  mines  of  the  precious  metals  are,  in  gen- 
eral, singularly  unprofitable,  after  they  have  passed  oui 
of  the  hands  of  the  original  owners.  It  has  grown  int<i 
a  proverb  in  South  America,  that  if  a  man  own  a  cop- 
per mine  he  will  grow  rich,  if  he  own  a  silver  mine  h« 
will  gain  nothing,  but  if  he  own  a  gold  mine  he  will  cer- 
tainly be  ruined.  The  fact,  however,  may  be  easily 
accounted  for.  Tiie  imaginations  of  men  are  alvvay)> 
strongly  excited  by  the  contemplation  of  the  precious 
metals,  and  it  is  rare  that  any  thing  but  experience  can 
teach  ti.em,  that  they  may  buy  gold  too  dear.  Hence. 
i]»ey  do  not  compute  the  chances  of  profit  in  the  pro- 
30  • 


354  INTEREST    ON    REAL    ESTATE. 

duction  of  gold,  as  coolly  as  they  do  in  any  other  case. 
But  the  production  of  gold  is  govenied  by  as  fixed  laws, 
as  the  production  of  wheat.  Gold  cannot,  any  more 
than  wheat,  be  produced  by  an  effort  of  the  imagination. 
It  is  the  result  of  labor,  and  skill,  and  expense.  And, 
if  these  be  greater  than  the  revenue,  a  man  will  as  as- 
suredly be  ruined  by  producing  gold,  as  by  conducting 
any  other  unprofitable  business  ;  his  imagination  to  the 
contrary  notwithstanding. 

The  interest  of  land,  or  real  estate  in  general,  is  com- 
monly less  than  that  of  other  property ;  that  is,  if  any 
particular  stock  costs- one  hundred  dollars,  and  yields,  as 
interest,  but  three  per  cent.,  it  would  not  sell  for  one 
hundred  dollars,  but  for  fifty  or  sixty  dollars.  But  land 
which  costs  one  hundred  dollars,  although  it  yield  but 
three  per  cent.,  will  sell  for  ninety  or  one  hundred  dol- 
lars. That  is,  men  are  willing  to  receive  less  interest 
for  capital  in  land,  than  other  property.  It  may  be  worth 
while  to  suggest  the  reason  of  this  difference. 

1.  Property  in  land,  is  considered  more  secure  than 
any  other  property.  The  principal  may  be  considered 
indestructible.  Hence,  it  is  the  safest  of  all  invest- 
ments, and  nothing  is  paid  for  the  risk. 

2.  The  title  to  land  can  be  more  definitely  secured, 
than  that  of  any  other  property.  The  legal  instruments, 
by  which  it  is  secured  to  the  individuals,  are  a  matter  of 
public  record.  The  boundaries  of  land,  can  be,  and 
commonly  are,  ascertained  with  entire  precisicm.  The 
land  itself  cannot  be  removed.  Hence,  the  ownership 
of  it  can  be  always  ascertained  and  conveyed  to  pos- 
lerity. 

3.  Men  generally  derive  some  influence  and  consid* 
eialion  from  the  ownership  of  land,  which  they  do  not 
•Jorive  from  any  other  possessions.  In  many  places,  the 
light  of  suffrage  is  restricted  to  landholders.  Where 
this  rule  exists,  it,  of  course,  shows  the  degree  of  con- 
sequence which  is  attached  to  this  sort  of  possession. 
And  the  fact,  that  it  has  so  frequently  existed,  while  the 
contr«iry  rule  has  never  existed,  show?  the  general  ten- 
dency upon  the  «ubject 


DISTRIBUTION    ILLUSTRATiJU.  365 

4  There  is,  I  think,  in  the  human  race,  a  strong  dis- 
jiosiiion  to  become  the  owners  of  land ;  and  a  natural 
love  to  the  pursuit  of  agriculture.  Men  of  all  profes- 
sions, look  forward  to  some  period  of  life,  in  which,  re- 
lieved from  the  toils  of  business,  they  may  retire  to  the 
ijuiet  country.  To  whatever  extent  this  disposition  ex- 
ists. It  of  course  tends  to  raise  the  price  of  land,  above 
that  of  other  property,  paying  the  same  rate  of  profit. 
If  a  man  receive  a  part  of  his  remuneration  in  pleasure, 
he  will  be  content  to  receive  less  in  the  form  of  money. 

5.  And,  lastly,  the  natural  progress  of  society  tends 
to  increase  the  value  of  landed  property.  This  has 
been  already  illustrated  in  general,  in  the  remarks  which 
have  been  made  upon  rent.  And  it  must  be  evident, 
that,  land  remaining  the  same,  and  the  population  con 
tinually  increasing,  the  demand  for  land  must  continually 
increase.  And,  besides  this,  the  progress  of  society 
creates  not  only  a  more  extensive  demand  for  land,  but 
a  much  greater  variety  of  demands.  As  such  is  the 
tendency,  men  are  willing  to  hold  land  at  a  less  interest 
than  other  property,  in  the  hope  that  the  rise  of  price  at 
some  future  time,  will  compensate  for  their  present  loss. 
Thus,  men  frequently  invest  money  in  wild  lands,  ex- 
pecting to  reap  no  profit  from  them  for  many  years,  but 
calculating  upon  a  rise  of  price  at  some  time  or  other, 
which  shall  abundantly  repay  both  principal  and  interest. 

Such  are,  I  believe,  the  principal  circumstances  which 
effect  the  distribution  of  the  profits  of  capital,  and  the 
wages  of  labor.  It  may  be  useful  to  illustrate  the  mode 
m  which  they  operate,  in  an  individual  case.  Let  us 
lake,  for  instance,  a  yard  of  calico. 

1.   The  price  of  a  bale  of  cotton  is  made  up  of  th« 
rent  of  the   land  on  which   it  grew,  the  wages  and   ex- 
pense of  the  laborers  who  were  emplo^'eo  in  its  ciilliva 
lion,  the  labor  and  skill  of  the  agriculturist  who  superin 
tends  the  labor,  the  cost  of  seed,  manure,  utensils,  &lc. 
He  who  buys  the  cotton,  pays  a  price  sufficient  to  re- 
munerate these   laborers,  pay  the  interest  on  the  invest 
meiit,  and  replace  the   expenditure  for  materials.      We. 
who  raises  the  cotton,  distributet  the  money  which  he 


356  DISTRIBUTION    ILLUSTRATEn 

has  received,  according  to  the  principles  which  have 
been  above  suggested. 

2.  The  cotton  is  sent  by  the  merchant  in  Mobile  to 
New  York,  and  sold  at  an  advanced  price  to  the  mer- 
chant, in  this  latter  place.  This  advance,  is  sufficient 
to  remunerate  the  merchant  in  Mobile,  and  to  pay  the 
cost  of  transportation.  The  merchant  at  Mobile  is  thus 
paid  for  his-  labor  and  skill  in  selecting  and  stowing  the 
cotton  ;  and  for  the  use  of  his  capital  whilst  it  was  in- 
vested in  cotton.  The  cost  of  transportation  is  made 
up  of  cost  of  investment  in  the  vessel,  in  the  wear  and 
tear  which  it  undergoes,  in  subsistence  of  mariners,  and 
cost  of  insurance.  This  remuneration  is  distributed,  as 
we  have  stated,  according  o  the  skill  and  labor  of  the 
several  persons  by  whom  it  has  been  performed.  This 
is  paid  by  the  merchant  in  New  York,  and  adds  so  much 
to  the  price  of  the  cotton.  When  paid,  it  is  divided 
between  the  owners  of  the  vessel  and  the  mariners,  ac- 
cording to  the  laws  which  govern  the  wages  of  labor  and 
of  capital. 

The  cotton  is  bought  by  the  manufacturer,  who  pays 
the  merchant  in  New  York,  what  he  paid  to  the  mer- 
chant in  Mobile,  with  an  addition  for  transportation, 
agency,  and  the  use  of  capital  whilst  it  has  been  in  his 
handfi.  He  removes  it  to  his  manufactory,  cards,  spins, 
and  weaves  it,  and  prepares  it  for  the  calico  printer,  to 
whom  it  is  next  sold.  The  calico  printer  pays  the  man- 
ufacturer what  he  paid  the  merchant,  and  an  additional 
sum  for  the  value  which  he  has  conferred  upon  it.  This 
sum  is  the  compensation  to  the  manufacturer.  With  it 
he  remunerates  himself  for  his  use  of  capital,  labor,  and 
skill,  aid  pays  his  workmen,  for  their  labor,  according 
10  their  skill  and  industry. 

It  now  goes  through  the  process  of  printing,  and  is 
then  sold  to  the  merchant  at  an  additional  advance. 
This  advance  is  sufficient  to  replace  the  price  paid  by 
the  cahco  printer  to  the  manufacturer,  and  also  to  pay 
the  calico  printer  for  the  use  of  his  capital,  and  the  la- 
bor of  his  workmen.  It  is  by  the  merchant  sold  to  the 
consumer.     The  consumer  pays  the  merchant  the  price 


EXTENT    OF    EUSFNESS.  357 

paid  by  him  to  the  manufacturer,  and  an  additional  sum, 
sufficient  to  remunerate  him,  for  the  use  of  his  capital, 
skill,  and  labor.  So  that,  wheTi  the  article  comes  to  the 
consumer,  it  is  charged  with  all  these  previous  prices, 
which  have,  in  these  various  processes,  accumulated 
upon  it.  The  consumer  pays  what  has  been  paid  to  the 
agricidturist,  the  mariner,  the  cotton  merchant  in  IMo 
bile,  and  the  cotton  merchant  ii  New  York,  the  mami 
facturer,  the  calico  printer,  ana  the  calico  merchant. 
Kach  several  amount  has  been  charged  upon  it  in  its 
piogress,  and  the  consumer,  at  last,  pays  enough  to  re- 
place the  whole.  The  case  is  the  same  with  a  watch,  a 
knife,  a  plough,  or  any  other  article  of  merchandise. 

I  shall  conclude  this  chapter  with  two  general  re- 
marks ;  one,  on  the  proper  use  of  cretlit ;  ihe  other,  on 
the  nature  of  insurances. 

From  what  has  been  said  upon  the  nature  of  credit, 
it  is  evident  that  a  merchant  may  easily  carry  on  a  busi- 
ness greatly  beyond  his  actual  capital,  and  even  with  no 
capital  at  all.  For  instance,  he  may  sell  wholly  the 
goods  of  another,  by  purchasing  entirely  on  credit.  Or 
he  may  borrow  capital  of  an  individual,  or  of  a  bank, 
and  pay  cash  for  his  stock,  and  interest  on  his  purchase 
nKjney.  In  this  case,  he  uses  the  property  of  the  lend- 
er, instead  of  the  property  of  the  merchant  of  whom  he 
purchases.  Or  he  may  possess  capital,  say  ten  thou- 
sand dollars,  of  his  own,  and  may  effect  credits  to  twice 
or  thrice  this  amount.  Or,  lastly,  he  may  employ  in 
trade  no  more  capital  than  that  which  he  actually  pos- 
sesses. 

Now  it  is  manifest,  that  the  profit  must  be,  in  these 
cases,  very  dissimilar.  When  a  merchant  owns  all  the 
capital  he  employs,  he  receives  as  profit,  interest  on  his 
capital,  and  remuneration  foi  his  labor  and  skill.  When 
he  owns  but  a  part,  he  receives  interest  for  that  pari, 
and  remuneration  for  his  labor  and  skill  in  managing  the 
whole.  When  he  owns  nothing,  he  receives  nothing  for 
interest  on  the  capital,  but  only  remuneration  for  his  la- 
bor and  skill  in  the  management  of  the  capital. 

The  ri$k  of  failure^  and  the  liability  of  injuring  otk 


S58  EXTENT    OF    BUSINESS. 

ers,  are  also  dissimilar.  He  who  owns  all  the  capital 
he  uses,  can  injure  no  one  ;  because  he  cannot  lose 
more  than  all,  and,  as  he»owns  all,  he  is  the  sole  suffer- 
er. His  payments  may  possibly  be  delayed,  but  he 
will,  in  the  end,  be  able  to  pay  every  one  his  due. 

When  a  merchant  owns  a  part  of  the  capital  which 
h*?  employs,  he  is  not  liable  to  injure  his  creditors,  un- 
less his  loss  be  sufficient  to  absorb  more  than  the  por- 
tion which  he  himself  possesses.  But  when  a  merchant 
trades  wholly  upon  the  capital  of  others,  if  his  losses 
are  more  than  sufficient  to  cover  the  advance  due  to  his 
labor  and  skill,  he  must  fail,  and  his  creditors  must 
suffer. 

Hence,  the  moral  and  economical  principles  which 
should  govern  men  in  the  transaction  of  business,  under 
these  circumstances,  are  somewhat  dissimilar. 

1.  If  a  man  choose  to  squander  or  to  risk  his  own 
property,  though  there  may  be  a  moral  question  in  re- 
spect to  his  duty  to  God,  there  is  none  in  respect  to  his 
duty  to  man.  If  he  pay  all  his  debts,  no  one  has  any 
claim  upon  him.  Yet,  so  far  as  his  own  interest  is  con- 
cerned, he  may  do  well  to  remember,  that  men  will  very 
naturally  suppose,  that,  after  having  wasted  all  that  was 
his  own,  it  will  not  be  safe  to  trust  him  with  what  be- 
longs to  others. 

2.  If  a  man  trade  in  part  with  the  property  of  others, 
he  is  bound  so  to  conduct  his  affairs,  as  to  expose  their 
property  to  no  unnecessary  risk  that  can  be  foreseen. 
Hence,  if  their  guaranty  against  loss,  consist  in  that  part 
of  his  stock  which  he  owns,  he  is  bound  to  guard  against 
every  risk,  which  could  not  be  made  good,  by  the  sacri- 
fice of  his  own  property.  This  principle  affects  both 
l'i'>  kind  and  the  amount  of  business  which  he  under- 
takes. It  should  be  of  such  a  kind^  as  is  exposed  to 
no  greater  risk  than  may  be  covered  by  his  own  proper- 
ty. It  should  be  only  to  such  an  extent,  that  no  ordina- 
ry fluctuation  of  business  will  endanger  those  who  have 
confided  in  his  skill  and  integrity.  If  he,  knowingly, 
act  otherwise,  he  is  dishonest.  Nor  is  this  all.  If  he 
rfially  expose  others  to  no  risk,  yet  if  he  so  enlarge  his 


NATURE    AND    USE    OF    INSURANCE.  359 

business,  tliat  he  is  continually  obliged  to  call  upon  his 
neighbors  for  assistance,  and  to  throw  himself  on  their 
mercy,  to  save  him  from  loss  of  mercantile  character 
he  trifles  with  his  credit,  and  makes  an  unfair  use  of  their 
kindness.  A  man  who  is  always  exposing  himself  to 
extreme  risks,  will  generally  expose  himself  once  too 
often. 

3.  He  who  trades  wholly  upon  the  capital  of  another, 
should  consider  himself  essentially  in  the  character  of  an 
agent,  and  at  liberty  to  expose  the  property  of  his  prin- 
cipal to  no  risk  ;  or  which  an  unprejudiced  person  would 
not  consider  reasonable.  He  is  to  remember,  that  if  he 
succeed,  the  owner  of  the  property  derives  no  benefit 
beyond  the  fair  and  ordinary  profit ;  but  if  he  fail,  the 
owner  suffers  all  the  loss,  and,  therefore,  he  has  no  right 
to  seek  to  benefit  himself,  at  the  risk  of  impoverishing 
another. 

4.  The  same  rule  should  govern  the  expenses  of  him 
who  is  engaged  in  business  with  the  capital  of  another. 
He  derives  from  his  trade  nothing  more  than  the  wages 
of  his  skill  and  labor.  Within  the  amount  of  these 
wages,  his  expenses  should  be  restricted.  If  he  expend 
more,  he  is  living  dishonestly  on  the  property  of  another. 
If  he  expend  the  whole  of  these  wages,  he  is  accumu- 
lating no  capital,  but  at  the  end  of  the  year  will  be  as 
poor  as  he  was  at  the  beginning.  He  can  only  become 
rich  by  reducing  his  expenses  as  far  as  possible  below 
his  income,  and  thus  having,  every  year,  something  to 
invest  as  capital,  which  shall  give  stability  to  his  credit, 
and  increase  to  his  annual  revenue. 

Of  Insurance.  When  property  of  any  kind  is  de- 
structible, it  is  liable  to  be  destroyed  by  accident.  Thus 
houses,  being  combustible,  are  liable  to  be  destroyed  by 
fire.  Ships  are  liable  to  be  wrecked  by  storm  and  tem- 
pest This  liability  is  called  risk.  It  is  evident  that  h 
may,  under  given  circumstances,  be  estimated.  Thus, 
if  we  know  the  value  of  all  the  houses  in  a  given  city, 
and  the  amount  of  value  in  houses,  which,  on  an  avern^e, 
lor  several  years,  has  been  destroyed  by  fire,  we  may 
estimate    how    great    the    risk    of  fire    in   that    city    is 


360  NATURE    AND    USE    OF    INSURANCE. 

The  case  is  the  same   with  ships,  or  with   any  othti 
property. 

Now  this  risk  being  thus  known,  one  person  may  beai 
it  as  well  as  another.  If  1  liave  a  ship  at  sea,  1  ma) 
either  bear  the  risk  of  losing  it  myself,  or  I  may  pay 
another  person  for  bearing  the  risk  for  me.  This  trans- 
fer of  risk  is  found  convenient,  and  eiiher  companies  or 
individuals  are  easily  found,  who,  for  a  small  addition  lo 
ii]e  actual  value  of  the  risk,  are  willing  to  insure  any 
property  that  may  be  offered. 

From  this  view  of  the  case,  it  is  manifest,  that  insur- 
ance has  no  effect  upon  the  fact  of  the  loss.  If  a  ship 
and  cargo  worth  one  hundred  thousand  dollars  be  sunk, 
precisely  one  hundred  thousand  dollars'  worth  of  value  is 
destroyed.  The  only  effect  of  insurance  is,  to  make  the 
loss  fall  upon  one  person  instead  of  upon  another.  The 
benefit  of  this  transfer  consists  in  this,  that  the  loss  is 
thus  equalized.  It  is  better  for  a  community  to  divide  a 
given  loss  among  a  great  number  of  persons,  than  to  suf- 
fer it  to  fall  exclusively  upon  one. 

And  hence,  inasmuch  as  every  one  has  the  power  ol 
avoiding  risk,  by  paying  a  small  premium  ;  every  one 
whose  property  is  small,  and  liable  to  be  lost  by  a  single 
accident,  is  negligent  if  he  suffer  it  to  remain  a  moment 
uninsured.  Specially  is  this  the  case,  when  he  holds 
the  property  of  others  ;  or  when  their  only  security  for 
payment  depends  upon  the  stock  in  trade  which  he  pos- 
sesses. 

And  again.  As  insurance  has  no  effect  upon  the  fad 
of  loss,  the  higher  the  premium  of  insurance  the  greater 
is  the  annual  loss  to  a  country  ;  because  it  shows  us  how 
great  an  amount  of  property  is  annually  destroyed. 
Hence  a  sound  policy  would  always  dictate  the  iir  por 
tance  of  taking  every  means  to  reduce  the  rate  of  insur- 
ance as  low  as  possible.  This  can  be  done  only  by  re- 
ducing the  risk  of  the  accidental  destruction  of  property. 
On  this  account,  the  abundant  supply  of  water  is  a  mat- 
ter of  inestimable  economical  importance  to  a  city.  The 
difference  in  the  amount  annually  paid  for  insurance  by 
the  two  cities  of  New  York  and  Philadelphia  is  enor- 


NATURE    AND    USE    OF    INSURANCE.  361 

mous  Nor  is  this  all.  New  York,  in  one  single  night, 
has  lost,  by  fire,  property  sufficient  to  pay  the  expense 
of  abundantly  supplying  herself  with  water  three  times 
over.  The  sut.ie  principles  would  teach  us  the  impor- 
tance of  accurate  surveys  of  the  coast,  the. erection  of 
light  houses,  and  of  wise  and  judicious  laws  for  the  gov- 
ernment of  pilots. 


BOOK  FOURTH. 


OF  CONSUMPTION. 


CHAPTER  FIRST. 

OF    THE    NATURE    AND    DESIGN    OF    CONSUMPTION. 

Of  the  nature  of  Consumption.  Consumption  is  tlie 
destruction  of  value.  By  this  is  not  meant  the  annihi- 
lation of  the  material^  but  only  of  a  particular  form  of 
utility.  Thus,  if  gunpowder  be  burned,  if  bread  be 
eaten,  if  a  tree  be  felled,  the  particular  utility  which 
each  originally  possessed,  is  destroyed  forever.  And 
this  destruction  of  value  takes  place,  altogether  in- 
dependently of  the  result  which  may  in  different  cases 
ensue  ;  because  that  destruction  is  as  truly  effected  in 
one  case  as  in  another.  A  load  of  wood,  when  it  lias 
beer,  burned,  as  truly  loses  its  utility,  that  is,  its  powei 
of  creating  heat,  when  it  is  destroyed  in  a  conflagration, 
as  when  it  is  consumed  under  a  steam  boiler,  or  in  a  lire 
place,  though  the  result  in  the  two  cases,  may  be  a  cry 
dissimilar.  If  bread  be  thrown  into  the  sea,  its  utility  is 
destroyed,  just  as  much  as  if  it  were  eaten  ;  though,  in 
the  one  case,  there  is  no  result  from  the  consumption, 
and,  in  the  other,  it  is  the  nr.eans  of  creating  the  vigor 
necessary  to  labor. 

Hence  consumption,  viewed  simply  by  itself,  may  be 


NATURE     OF     CC/fSUMPTlON  363 

considered  in  the  nature  of  a  misfortune.  It  is  the  de- 
struction of  so  much  wealth  as  is  consumed.  A  man, 
if  he  had  his  choice,  would  rather  create  one  produc* 
without  destroying  another  ;  or  enjoy  a  gratification,  if 
it  were  possible,  without  rendering  tli€  thmg  enjoyed  use- 
less. But,  inasmuch  as  it  is  the  law  of  our  Creator  that 
we  fchall  obtain  our  possessions,  and  gratify  our  desires, 
on  no  other  conditions  than  that  of  the  destruction  of 
value,  we  have  no  choice.  We  cannot  cut  up  a  hide  of 
leather  for  the  purpose  of  making  shoes,  without  destroy- 
nig  forever  its  utility  as  a  hide  of  leather.  We  cannot 
cut  down  a  tree,  and  saw  it  into  boards,  without  destroy- 
ing forever  its  utility  as  a  tree.  We  cannot  enjoy  the 
pleasure  of  eating  an  orange,  without  destroying  for- 
ever the  power  in  that  orange  of  afibrding  to  any  one 
else  the  same  pleasure.  And  thus,  m  general,  con- 
sumption is  one  part  of  an  exchange,  in  which  we  sur- 
render one  value  with  the  hope  of  obtaining  another ; 
and  whether  the  hope  be  realized  or  not,  the  value  con- 
sumed \?  surrendered,  and  surrendered  forever. 

When,  however,  it  is  said,  that  the  utility  consumed 
is  destroyed  forever,  we  mean  only  to  speak  of  this 
particular  utility.  There  may  yet  remain  some  valuable 
quality  which  has  not  yet  been  affected.  .Thus,  if  a 
Jinen  garment  be  worn  out,  its  utility  as  a  linen  garmmit 
is  destroyed  forever.  It  may,  however,  still  possess  an 
important  utility,  as  a  material  for  the  manufacture  of 
lint  or  of  paper.  Wood  may  be  consumed  for  fuel 
and  its  utility  as  fuel  may  be  destroyed  forever.  A 
ijuantity  of  ashes  however  remains,  which  possesses  an 
utilit)  for  the  manufacture  of  soap.  A  pair  of  India 
rubber  shoes  may  be  worn  out,  and  yet  possess  a  valu 
able  utility  to  the  manufacturer  of  India  rubber  cloth 
Hence  we  see  the  importance,  in  all  cases,  of  entirel) 
exhausting  all  the  values  contained  in  any  product  before 
we  sinrender  it  up  as  worthless.  For  the  want  of  this 
care,  millions  of  property  are  aimually  wasted.  The 
difi'erence  between  the  cost  of  two  establishments,  in  the 
one  of  which  every  utility  of  every  siibsiance  is  consum- 
ed, and  it  tljc  other  of  which,  only  the  first  utility  is  cor- 


364  KINDS    OF    CONSUMPTION. 

sumud,  is  frequently  as  great  as  the  nett  profits  realized 
in  the  ordinary  employments  of  industry. 

1.  Consumption  may  be  either  of  labor  or  of  capital. 
A  mechanic  who  bestows  a  day's  labor  upon  a  table, 
consumes  that  amount  of  labor  upon  it.  He  also  con- 
sumes the  material  upon  which  he  has  labored.  He  has 
received  in  return  the  table,  and,  if  his  labor  and  capital 
have  been  well  employed,  the  result  will  recompense 
his  consumption,  both  of  labor  and  capital.  So  he 
who  employs  laborers  to  work  for  him,  consumes  all 
the  labor  which  he  purchases.  Hence  we  see  that 
every  day  spent,  is,  in  fact,  so  much  value  consumed. 
If  it  bring  no  profitable  result,  it  is  so  much  value  wasted. 

2.  Consumption  may  be  either  voluntary  or  involun' 
iary.  It  is  voluntary  when  it  is  effected  by  design.  It 
is  involuntary  when  it  is  the  result  of  accident.  In  either 
case,  if  there  be  consumption,  there  is  value  destroyed. 
The  difference  is,  that,  in  the  one  case,  there  is  a  profit- 
able result  expected  ;  in  the  other  case  there  is  none. 
If  a  loaf  of  bread  become  mouldy  by  neglect,  its  value 
is  destroyed,  just  as  much  as  though  it  were  eaten.  The 
difference  is,  that,  in  the  one  case,  the  loss  is  total  ;  in 
the  other  case,  the  consumption  of  value  creates  a  power 
to  labor,  which  is  of  more  value  than  the  loaf  itself.  If, 
for  the  want  of  a  fender,  fhe  fire  fall  out  of  the  fire  place, 
and  burn  the  carpet,  the  carpet  is  as  effectually  consum- 
ed as  if  it  were  worn  out  by  use.  The  difference  is, 
that,  in  the  one  case,  it  affords  a  substantial  convenience, 
and  in  the  other  it  affords  none.  If,  by  forgetfulness  or 
neglect,  a  gate  is  left  unlatched,  and  it  is  beaten  in 
pieces  by  the  wind,  it  is  as  effectually  consumed,  as  by 
Ihe  wear  of  several  years.  The  difference  is,  that,  in 
I  he  one  case,  it  answers  for  a  long  time  the  purpose  of 
inclosure,  in  the  other  case  it  answers  no  purpose  at  all. 
Hence,  the  necessity  of  care  and  vigilance  in  all  the 
business  of  hfe.  Almost  every  thing  is  constantly  tend- 
nig  to  consumption.  Vegetable  matter  decays.  Animal 
matter  putrefies.  Most  of  the  metals  may  be  corroded. 
Almost  all  our  possessions  are  liable  to  accidental  d^- 
struotion,  from  fire,  or  flood ;  from  the  frosts  of  wmter 


KINJS    OF    CONSUMPTION.  366 

or  the  heat  of  summer.  Hence,  without  our  contlmial 
care,  a  continual  process  of  consumption  will  be  going 
on,  by  which  our  capital  will  be  diminished. 

3.  Consumption  is  either  rapid  or  gradual.  The 
consumption  of  wood  for  fuel  is  rapid.  The  consump- 
tion of  wood,  in  consequence  of  the  wear  of  a  dwelling 
house,  is  gradual.  But  gradual  consumption  is  as  sure 
and  as  certain  as  though  it  were  rapid.  Hence,  in  esti- 
mating cost  and  expenses,  unless  an  allowance  be  made 
for  wear  and  tear,  our  calculations  will  not  agree  with 
the  fact.  If  a  man's  furniture  be  wearing  out  every 
year,  this  average  of  loss,  is  as  much  to  be  taken  into 
account,  in  estimating  his  expenses,  as  the  *  cost  of  the 
fuel  which  he  consumes. 

The  annual  consumption  of  an  individual,  is  the  sura 
total  of  all  the  values  which  he  destroys.  Hence  the 
materials  upon  which  he  operates,  the  tools  which  he 
wears  out,  the  expenses  of  his  household,  both  for  ma- 
terials and  for  labor,  are  all  to  be  reckoned  as  parts  of 
his  annual  consumption.  So,  also,  the  values  destroyed 
by  a  nation,  are  the  national  consumption.  The  exports 
of  an  individual  or  of  a  nation,  are  a  part  of  individual 
or  of  national  consumption,  since  value  to  the  full  amount 
of  ilie  exports,  is  abstracted  from  the  capital  of  the 
country.  On  the  contrary,  the  imports  are  the  product, 
or  what  the  country  receives  back  again  in  return  for  its 
exports  or  consumption. 

Every  man  in  the  country  is  a  consumer.  Without 
consuming  he  could  not  sustain  life  a  day.  He  must 
cotjsume  the  food  which  he  eats,  the  clothes  which  he 
wears,  and  the  dwelling  that  shelters  him.  Hence,  if  he 
do  not  produce  any  thing,  he  is  an  absolute  and  useless 
burden  upon  ihe  community.  If  he  do  not  produce  as 
nuicli  as  he  consumes,  he  is  by  the  whole  amount  of  that 
deficiency  an  unprofitable  member  of  the  body  politic. 

A  man  cannot,  honestly,  consume  more  than  he  pro- 
duces. And  the  more  he  produces,  the  more  may  he 
consume.  Hence,  the  more  industrious  and  the  richer 
the  community,  the  greater  will  be  the  consumption,  and 
of  course  the  demand.  Henco,  as  we  have  said  before, 
31* 


366  DESIGN    OF    CONSUMPTION. 

the  richer  the  cominunitjo  the  better  will  it  be  for  everj 
class  of  producers. 

II.  Of  the  design  of  Consumption.  Consumption, 
as  we  have  said,  is  the  destruction  of  value.  But  no 
man  in  his  senses,  will  consume  value  without  some  ex- 
pectation of  advantage.  Hence,  the  design  of  con- 
sumption is  always  some  advantage  which  cannot  be  ob- 
tained in  any  other  way. 

This  advantage  is  of  two  kinds.  1.  The  increase  of 
value  :  or,  2.    The  gratification  of  desire. 

1.  The  increase  of  value.  Tiiis  is  the  design  of  con- 
sumption in  all  the  departments  of  industry.  Thus,  the 
farmer  consumes  seed,  utensils,  rent,  manure,  labor,  and 
food  for  the  sustentation  of  laborers.  These,  all  are  ab- 
stracted from  his  capital,  and  their  value  is  destroyed, 
either  wholly  or  in  part,  forever.  But  he  consumes 
them  cheerfully,  in  the  expectation  that  the  crop  which 
he  reaps  will  replace  them,  and  repay  both  the  interest 
of  his  capital,  and  his  various  outlays  for  materials  and 
labor,  and  leave  him  also  a  suitable  recompense  for  his 
industry  and  skill. 

The  manufacturer,  consumes  raw  cotton,  instruments, 
machinery,  and  labor.  The  value  of  these  various  pro- 
ducts, is  destroyed  forever.  But,  by  means  of  this 
destruction,  he  produces  a  fabric  which  repays  all  his 
consumption,  and  yields  him  a  reasonable  profit. 

The  merchant  collects  the  productions  of  his  own 
country,  and  sends  them  abroad  in  his  ship.  Ho  thus 
consumes  these  products,  and  also  the  wear  and  tear  of 
bis  ship,  and  the  labor,  skill,  and  subsistence  of  his  offi- 
cers and  crew.  His  return  cargo,  if  the  voyage  have 
been  successful,  replaces  his  cargo  exported,  pays  the 
expense  of  transportation,  and  affords  him  a  compensa- 
tion for  his  labor  and  skill. 

And  thus,  in  all  the  operations  of  industry,  the  pro- 
cess of  consumption,  or  the  destruction  of  particular 
values  for  the  sake  x>f  producing  other  and  greater  val- 
ues, is  continually  going  on.  And  men  consume  values 
in  this  manner  cheerfully,  because  they  are  aware  thai 
increane  of  value  is  to  be  effected  in  no  other  way. 


DESIGN    OF    CONSUMPTION.  367 

2.  The  gratification  of  desire.  In  this  ca:;e,  the 
value  of  a  product  is  commonly  destroyed,  without  the 
anticipation  of  the  creation  of  any  other  product  by 
which  it  is  to  be  replaced.  The  purposes  for  which 
values  are  consumed  in  this  manner  are  various. 

1.  For  the  gratification  of  those  desires  which  are 
necessary  to  the  preservation  of  life  and  health.  In  this 
manner,  we  consume  food,  clothing,  and  shelter.  In 
this  case,  there  is  combined  with  the  gratification  of  de- 
sire, a  substantial  benefit,  in  the  health  and  vigor  which 
we  derive  from  suitable  nourishment. 

2.  The  gratifications  of^  the  senses  and  the  tastes. 
We  consume  values  in  the  gratifications  of  sense,  when 
we  expend  money  for  shows,  for  mere  delicacies  of  the 
table,  for  luxuries  of  dress,  and  for  any  thing  of  which 
the  only  result  is,  the  gratification  of  a  physical  appetite. 
In  this  case,  our  only  recompense  consists  in  the  pleas- 
ure experienced  in  the  organ  of  sense.  The  pleasures 
of  taste,  ar^  enjoyed  in  painting,  statuary,  architecture, 
music,  &c.  In  this  case,  besides  the  gratification  of  the 
taste,  there  is  also  an  additional  result,  in  the  mental  cul 
tivation  and   refinement,  which  such  pleasures  promote. 

3.  Intellectual  gratifications.  We  consume  money, 
for  this  purpose,  in  the  purchase  of  books  an^  philo- 
sophical instruments,  and  we  consume  time  in  the  study 
and  use  of  them.  We  here  enjoy  the  pleasure  of  intel- 
lectual exercise,  and  also  obtain  that  knowledge,  by 
which  we  are  enabled  to  perform  the  duties  of  life  with 
greater  success. 

4.  Social  pleasures.  We  gratify  our  socal  instincts, 
by  hospitality  to  our  friends  ;  and  thus  strengthen  the 
tics  which  bind  us  to  the  human  race. 

6.  Moral  pleasures.  In  benevolence,  for  instance,  we 
expend  money  for  the  good  oC  others.  In  this  case,  we 
receive  gratification  in  the  act  itself,  and  also  cultivate  in 
ourselves  those  dispositions,  which  make  us  more  wor- 
thy of  the  regard  oi  our  fellows,  and  more  well-pleasing 
\o  ou/  Father  who  is  in  heaven. 

We  have  said  that,  by  consumption,  value  is  de- 
Blroyed  ;  but  it  is  destroyed  with  the  expectation  of  real- 


368  DESIGN    OF    CONSUMPTION. 

izlng  a  more  valuable  result.  Hence,  we  see  that  tha 
characler  of  this  consumption,  is  to  be  decided  by  ascer- 
taining how  far  this  expectation  has  been  realized.  If  a 
product  of  more  value  than  the  lime  and  labor  con- 
sumed, be  created  by  the  consumption,  such  consump- 
tion is  called  productive.  Such  is  the  case  when  a 
farmer  consumes  labor  and  capital,  worth  one  hundred 
dollars,  and  realizes  a  harvest  worth  two  hundred  dol- 
lars. If  the  product  be  not  equal  to  the  consumption, 
such  consumption  is  called  unproductive.  If  no  product 
at  all  be  realized,  the  consumption  is  then  a  total  loss. 

And,  the  same  principles<apply  when  consumption  is 
effected  for  the  purpose  of  gratifying  a  desire.  If  no 
such  result  be  realized,  it  is  a  total  loss.  If  the  gratifi- 
cation be  of  less  worth  than  the  value  consumed  ;  or  if 
we  have  obtained  a  less  amount,  or  less  excellent  grati- 
fication, than  we  could  have  procured  by  some  other 
mode  of  expenditure,  there  is  always  a  loss,  although  it 
may  not  be  total,  and  the  consumption  is  unwise. 

From  what  has  been  said,  we  may  easily  see  the  rules 
by  which  expenditure  of  all  kinds  should  be  governed. 

1.  Inasmuch  as  consumption  is  a  destruction  of  value, 
and  annihilates  forever  the  particular  value  which  we 
consume^  our  consumption,  for  the  purpose  of  producing 
a  given  result.,  should  be  as  small  as  possible.  What- 
ever is  consumed  beyond  what  is  necessary  to  accom- 
plish our  purpose,  is  so  much  absolute  loss. 

2.  The  consumption  being  given,  it  should  be  our  ob- 
ject to  derive  from  it  as  large  a  product  or  as  valuable  a 
gratification  as  possible.  Whatever  is  consu  ned,  that 
does  not  conduce  to  this  result,  in  every  way  of  which 
it  is  capable,  is  so  much  utility  thrown  away. 

When  these  rules  are  perfectly  obeyed,  we  enjoy  as 
much  as  our  circumstance*  allow  ;  and  we  also  enjoy  it, 
with  as  little  expense  to  the  means  of  happiness  of  oth- 
ers as  the  nature  of  the  present  constitution  permits. 

Consumption  is  of  two  kinds.  Individual  and  Public. 
Individual  consumption,  is  what  the*individual  coniumes 
for  his  own  personal  profit  or  gratification  Public  con- 
3umptioii,  is  what  is  consumed  by  the  society,  for  the 
benefit  of  the  whole 


CHAPTER  SECOND 

OF    INDIVIDUAL    CONSUMPTION. 

The  consumption  of  each  individual,  is  the  amount 
cf  value  which  he  destroys,  either  for  his  own  personal 
profit^  or  for  the  gratification  of  his  desires. 

Individual  consumption  is,  then,  of  two  kinds  ;  first, 
what  he  consumes  for  the  sake  of  reproduction,  and 
secondly,  what  he  consumes  for  the  gratification  of  de- 
sire ;  or,  in  other  words,  what  he  consumes  in  personal 
and  domestic  expenditures.  We  shall  consider  these 
subjects  separately. 


SECTION  I. 

OF     INDIVIDUAL     CONSUMPTION     FOR     THE     SAKE     OP 
REPRODUCTION. 

This  is  the  consumption,  which  every  individual  ef- 
fects, who  carries  on  the  operations  of  production.  The 
fanner,  the  mechanic,  the  manufacturer,  the  mercharit 
are  all  consumers,  and  are  such  in  a  greater  or  less  de- 
gree, according  to  the  extent  of  their  production. 

Productive  consumption  requires  hoth  skill  and  labor, 
while  consumption  for  the  sake  of  gratification  requires 
neither.  It  requires  labor  and  skill,  so  lo  consume  seed 
and  manure,  &c.,  as  to  produce  a  loaf  of  bread,  but  it 
requires^  neither  skill  nor  labor,  to  eat  it  ahvv  it  has  been 
produced.  'It  requires  labor  and  skill  so  to  consume 
wool  and  dye  stufT's  as  to  produce  cloth  ;  and  so  to  con- 
sume that  cloth  as  to  produce  a  suit  of  clothes,  but  it  re* 
quires  no  skill  or  labor  to  wear  them  after  they  have 
been  produced. 


370  CONSUMPTION    OF    CAPITAL. 

On  ifie  other  hand,  productive  consumption,  Is  com 
monly  attended  with  no  immediate  gratification.  The 
farmer  may  prefer  agricuhure  to  manufactures,  but  he 
would  not  commonly  labor  for  the  mere  pleasure  of  the 
operation.  Could  he  secure  his  crop  with  half  the  pres- 
ent labor,  or  with  no  labor  at  all,  he  would  doubtless 
do  so.  The  case  is  the  same  with  the  manufacturer,  or 
any  other  producer. 

We  can  rarely  use  the  same  value  for  these  two  dis- 
tinct and  opposite  purposes.  If  a  man  consume  one 
hundred  dollars  in  amusement,  or  in  ostentation,  he  can- 
not have  it  also  as  capital,  to  be  employed  in  his  trade. 
And,  not  only  can  he  not  have  it  now,  but  he  can  never 
have  it  again.  If  it  be  invested  in  reproduction  this 
yeai,  it  may,  by  the  next  year,  amount  to  one  hundred 
a;id  fifty  dollars,  and  the  year  after,  to  two  hundred  dol- 
lars, and  in  twenty  years  it  may  become  five  thousand 
dollars.  If  it  be  spent  on  an  entertainment,  or  a  jour- 
ney of  pleasure,  it  is  lost,  and  all  that  it  might  have  sub- 
sequently become,  is  lost  forever.  This  should  b^ 
borne  in  mind  by  every  man  who  wishes  to  rise  to  inde- 
pendence. Every  dollar  which  is  spent  in  self-gratifica- 
tion, is  so  much  capital  placed  forever  out  of  his  power. 
And,  on  the  contrary,  every  dollar  which  he  invests  in 
reproductive  employment,  may  at  any  future  time  minis- 
ter to  gratification,  or  it  may  provide  the  means  of  much 
more  valuable  gratification  in  subsequent  life. 

Consumption  is  either  of  capital,  or  of  labor. 

I.   Consumption  of  Capital. 

The  principles  which  we  have  already  endeavored  to 
illustrate,  would  suggest  the  following  rules,  respecting 
this  part  of  consumption  ; 

1 .  Our  consumption  oj  capital,  in  order  to  produce  a 
given  result,  should  be  as  small  as  possible.  The  ordi- 
nar)  maxim  is  as  true  as  it  is  common,  a  penny  mved  t,« 
a  penny  earned.  In  estimating  the  profits  oT  any  oper 
ation,  it  is  manifest,  that  he  who  Ifes  produced  a  value 
worth  one  hundred  dollars,  at  an  expense  of  sixty  dol- 
lars, reaps  a  profit  of  twenty  dollars  more  than  he  who 
has  produced   the  same  value  at  an  expense  of  eighty 


consOmrtion  of  capital.  371 

dollars.  Thus,  the  farmer  should  economize  to  the  ut- 
most all  his  materials.  He  who  saves  half  a  bushel  of 
seed,  in  sowing  an  acre,  enriches  himself  as  much  as 
though  he  had  reaped  half  a  bushel  more  per  acre.  Ii 
's  said  that  in  China,  sowing  is  always  done  by  drilling. 
One  of  Lord  Macartney's  suite  estimated  that  the  savings 
throughout  the  whole  empire,  from  this  improvement,  is 
sufficient  to  feed  the  whole  population  of  Great  Britain. 
The  same  principle  applies  to  mechanics,  manufacturers; 
and  all  consumers  whatever.  It  is,  unfortunately,  the 
case,  that,  from  want  of  care  and  ingenuity,  a  much  largei 
portion  of  value  is  commonly  consumed,  than  is  neces- 
sary for  the  production  required.  This  is  specially  ihf 
case  with  fuel.  Probably  not  more  than  one  tenth  of 
the  heat  giyen  off  by  wood,  is  rendered  serviceable  by 
the  common  fire  place. 

2.  We  should  employ  capital^  of  no  greater  value 
than  is  necessary  to  effect  the  production  intended. 
Hence,  every  producer  should  make  it  an  object  of  in- 
quiry, to  ascertain,  so  far  as  the  present  state  of  knowl- 
edge may  enable  him,  in  what  manner  he  may  efieci  his 
purposes,  by  the  least  costly  materials  The  merchant, 
on  this  principle,  should,  before  making  an  exchange, 
ascertain  what  is  the  cheapest  product  at  home,  with 
which  he  will  be  able  to  procure  a  given  amount  of  a 
product  from  abroad.  Very  niucli  of  the  sut-cess  of  a 
producer,  must,  of  course,  depend  upon  his  skill  in  thij. 
respect.  The  discovery  of  a  cheaper  dye  stuff,  of  equal 
goodness,  or  the  exchange  of  one  export  for  another, 
iiwy  frequently,  of  itself,  be  sufficient  to  render  a  man 
independent.  I  do  not,  of  course,  suppose  that  any 
man  will  be  so  simple  as  knowingly  to  expend  more  in 
production  than  he  supposes  necessary.  Tg  guaid  Inm 
against  this  folly  is  not  my  object.  .  It  is  rather  to  incite 
every  man  to  a  more  thorough  and  intimate  knowledge 
of  the  principles,  on  which  the  operation  which  he  con- 
ducts, depends.  It  is  only  by  such  knowledge,  that 
improvements  in  the  various  departments  of  industry  are 
to  lie  effected.  And  hence  we  set  the  importance  of 
knowledge,  to  every  man  in  the  community. 


ATS  CONSUMPTION    OF   CAPITAL 

3.  It  is  important  that  every  utility  possessed  by  any 
substance,  be  entirely  consumea. 

In  order  to  secure  this  resuh,  attention  must  be  paid 
to  two  circumstances.  First.  All  the  fragments  and 
remnants  should  be,  so  far  as  possible,  employed  to 
some  valuable  purpose.  This  principle  is  well  illus- 
trated in  the  various  uses  to  which  the  horns  of  cattle 
are  applied.  The  horn  consists  of  two  parts,  an  out- 
ward horny  case,  and  an  inward  conical  shaped  sub- 
stance. The  first  process  consists  in  separating  these 
two  parts,  by  means  of  a  blow  against  a  block  of  wood. 
The  horny  exterior  is  then  cut  into  three  portions,  by 
means  of  a  frame  saw. 

1 .  The  lowest  of  them,  next  to  the  root  of  the  horn, 
after  undergoing  several  processes  by  which  it  is  ren- 
dered flat,  is  made  into  combs. 

2.  The  middle  of  the  horn,  after  being  flattened  by 
heat,  and  its  transparency  improved  by  oil,  is  split  into 
thin  layers,  and  forms  a  substitute  for  glass,  in  lanterns. 

3.  The  tip  of  the  horn,  is  used  by  the  makers  of 
knife  handles,  and  of  the  tops  of  whips. 

4.  The  interior  or  core  of  the  horn,  is  boiled  down 
in  water.  A  large  quantity  of  fat  rises  to  the  surface 
This  is  sold  to  the  makers  of  yellow  soap. 

5.  The  liquid  itself f\s  used  as  a  kind  of  glue,  and  is 
purchased  by  the  cloth  dressers  for  stiffening. 

6.  The  bony  substance  which  remains  behind,  is  sent 
to  the  mill,  and,  being  ground  down,  is  sold  to  the  far- 
mers for  manure. 

7.  The  clippings  and  shavings,  are  also  sold  to  the 
farmers  for  manure,  or  are  used,  in  small  quantities,  for 
the  manufacture  of  toys.* 

Now,  it  is  evident,  that  if  any  part  of  this  material 
were  wasted,  the  cost  of  the  manufactured  articles  would 
be  higher,  and  the  gain  of  the  producer  less.  And,  we 
also  see  that  he  who  first  discovered  the  mode  of  ren- 
dering any  one  of  these  portions  of  a  horn  useful,  must, 
bj  thib  single  discovery,  have  made  himself  rich. 

*  Babbage  on  Manufactures. 


ECONOMY    OF    LABOR.  373 

And,  Secondly.  All  the  values  must  be  consumed  in 
ilie  most  profitable  manner.  It  frequently  happens,  that 
n  producer  wants  but  one  value  from  a  substance  for  his 
particular  purpose^  while  another  and  an  important  value 
remains  unappropriated.  It  is  always  a  matter  of  im 
poriance  to  employ,  in  the  best  manner,  every  value 
which  a  substance  is  known  to  possess.  Thus,  after  we 
have  derived  from  wood,  all  the  heat  which  it  can  evolve, 
it  leaves  ashes,  which  possess  an  important  value.  After 
the  oil  has  been  expressed  from  flax  seed,  the  residuum 
is  valuable  food  for  cattle.  The  employment  of  this 
utility,  of  course,  lessens  the  price  of  oil,  and  increases 
the  demand  for  it.  Hence,  we  see  the  superiority  of 
the  economy  of  large  establishments  to  that  of  smaller 
ones.  A  large  manufacturing  establishment,  can  carry 
on  several  distinct  operations,  for  the  sake  of  using  these 
secondary  utilities.  In  a  small  one,  this  would  be  im- 
possible, and  much  must  in  consequence  be  wasted 
Thus,  in  connexion  with  a  large  slaughter-house,  I  have 
seen  a  soap  and  candle  manufactory,  a  manufactory  of 
glue,  and  one  of  neat's  foot  oil  ;  while  a  large  number  of 
hogs  was  fattened  with  the  refuse  of  these  several  estab- 
lishments. In  this  manner,  every  part  of  the  slaugh- 
tered animal  was  profitably  consumed.  In  small  estab- 
lishment?, a  large  portion  of  these  fragments  would  be 
wasted. 

II.   Consumption  of  labor. 

The  principles  above  illustrated  would  teach  us  :  — 

1.  To  employ  precisely  as  much  labor  as  is  necessary 
to  accomplish  the  intended  result. 

We  should  never  employ  more  than  is  wanted.  This 
generates  idleness  and  negligence.  One  supernumerary 
laborer,  is  not  only  useless  himself,  but  he  generally  re- 
tpiires  the  lime  of  two  or  three  others,  to  bear  him  com- 
pany in  idleness. 

We  should  never  employ  less  labor  than  is  wanted. 
This  produces  confusion,  and  destroys  the  advantages 
of  correct  division  of  labor.  It  saves  nothing  to  em- 
|)loy  one  person  less  than  is  necessary  in  an  establish- 
ment, and  to  suspend  the  labor  of  others  several  tmos 
83 


374  ECONOMY     OF    LABOR. 

in  a  (lay,  In  order  to  do  the  work  which  that  one  should 
have  accomplished. 

In  general,  provided,  of  course,  the  work  be  well 
done,  the  less  the  consumption  of  labor  the  better  for 
the  producer.  Hence,  the  economy  of  labor-savmg  ma- 
chinery. He  who,  by  an  ingenious  contrivance,  is  able 
to  save  the  hire  of  one  laborer,  will  find  himself,  at  the 
end  of  the  year,  richer  by  precisely  this  amount  saved. 

2.  We  should  employ  labor  at  no  higher  price,  than 
is  necessary  to  accomplish  our  object. 

Every  important  operation  consists  of  several  subor- 
dinate operations,  requiring  very  different  degrees  of 
skill  in  their  execution.  According  to  these  degrees  of 
skill,  the  wages  of  labor  are  adjusted.  Now,  economy 
demands,  that  labor  of  no  higher  price  should  no  em- 
ployed on  each  several  operation,  than  the  importance 
of  the  operation  requires.  He  who  Is  able  so  to  arrange 
his  laborers,  as  to  execute,  by  labor  worth  fifty  cents, 
what  was  formerly  executed  by  labor  worth  one  dollar, 
makes  a  gain  of  fifty  cents  a  day.  Thus,  in  the  power- 
press,  the  labor  of  press-work,  which  formerly  employed 
two  able-bodied  men,  is  executed,  in  {5art,  by  animal 
force,  or  by  steam  power  ;  and  the  remainder  by  women. 
The  reduction  in  price,  thus  effected,  is  very  consider- 
able. 

But  while  this  is  the  fact,  it  is  also  the  fact,  that  it  is 
never  profitable  to  employ  laborers  incapable  of  accom- 
plishing the  result.  If  a  particular  part  of  an  operation 
require  skill  and  labor  worth  five  dollars  per  day,  it  is 
better  to  give  this  price  than  to  confide  it  to  an  incom- 
petent person,  who^s  willing  to  work  for  two  dollars  per 
day  Thus,  a  good  painter  of  calico  patterns,  a  good 
calico  engraver,  or  dyer,  may  be  cheaper  at  five  dollars 
per  day,  than  an  inferior  artist,  even  if  the  iatter  would 
perform  the  labor  for  nothing. 

We  hence  see,  again,  the  importance  of  an  accurate 
knowledge  of  principles,  to  every  one  engaged  in  exfen- 
«!ive  production.  Tt  is  by  deep  and  thorough  reflection 
upon  every  part  of  the  process  which  he  conducts,  that 
a  manufacturer  is  able  to  keep  up  with,  and  specially  to 


V 

ECONOMY     OP    LABOR.  375 

add  to,  the  improvements  of  the  age,  and  .o  prevent 
himself  from  being  undersold  by  his  more  enterprising 
and  intelligent  neighbors. 

3.   The  labo»  paid  for,  should  all  be  performed. 

Time,  as  it  is  frequently  said,  is  money.  It  is  surely 
money  to  him  who  pays  money  for  it.  And,  of  course, 
every  hour  for  v^^hich  he  pays,  that  is  spent  in  idleness 
or  uselessness,  is  so  much  useless  consumption  ;  or  so 
much  absolute  loss. 

The  causes  of  the  waste  of  labor  are  various.  Somo 
of  the  more  common  are  :  — 

1  Want  of  superintendence.  It  cannot  be  supposed 
that  laborers,  if  left  alone,  and  if  paid  by  the  day,  will 
labor  as  faithfully  as  if  laboring  for  themselves.  Hence, 
the  necessity  and  the  economy  of  efficient  superinten- 
dence. He  who  employs  twenty  men  by  the  day,  to 
perform  a  particular  piece  of  work,  will  find  that  an  ef- 
ficient superintendent  will,  by  preventing  idleness,  saun- 
tering, and  story-telling,  save  much  n^re  than  his  wages. 
And,  hence,  I  suppose  that  commonly,  where  the  labor 
IS  of  such  a  nature  as  to  allow  of  it,  it  is  cheaper  to  pay 
by  the  piece,  than  the  day.  In  the  one  case,  if  a  la- 
borer be  idle,  he  wastes  his  own  time  ;  in  the  other  case, 
(he  time  of  his  employer.  It  is  easy  to  perceive  which 
case  is  the  more  favorable  to  industry 

2.  Irregularity.  This  is  a  great  source  of  waste  of 
labor.  Where  tools  are  allowed  to  get  out  of  place, 
materials  to  be  deficient  or  unsuitable  ;  or  where  several 
laborers  are  obliged  to  stand  idle,  to  wait  for  the  com- 
pletion of  an  operation  which  is  done  out  of  season, 
much  time  must,  of  necessity,  be  lost.  In  a  shop  con- 
laining  a  dozen  workmen,  if  each  one  spend,  on  an  av- 
erage, half  an  hour  a  day  in  looking  for  misplaced  tools, 
or  in  waiting  for  materials  not  at  hand,  this  is  a  loss  of 
more  than  half  the  wages  of  one  laborer  a  day.  This, 
in  a  year,  woufd  be  sufficient  to  purchase  the  clothes  of 
n  small  family. 

3.  Defective  tools.  In  order  that  the  economy  of  la- 
l»or  may  be  as  great  as  possible,  the  tools  by  which  labor 
•8  saved,  should   be  as   perfect  as  possible  ;  otherwise, 


376  ECONOMY     OF    LABOR. 

we  derive  only  a  partial  benefit  from  the  invention.  Hf 
who  employs  a  man  to  chop  wood,  would  certainly  see 
the  importance  of  furnishing  him  with  a  sharp  axe.  He 
who  erects  a  fence,  to  save  the  labor  of  guarding  his 
cattle,  will  certainly  do  wisely  to  keep  his  fence  in  good 
order.  It  is  surely  less  labor  to  mend  a  gap  in  afenccj 
than  to  be  obliged  to  plant  a  field  a  second  time,  be- 
cause the  grain  has  been  destroyed  by  cattle,  which 
that  gap  permitted  to  enter.  It  takes  less  labor  to 
mend  a  leakage  in  a  mill  dam,  than  to  rebuild  the  dam 
after  it  has  been,  by  means  of  that  leakage,  carried 
away.  Hence,  we  see  the  importance,  of  keeping 
every  part  of  an  establishment  in  perfect  order,  and 
of  allowing  nothing  to  be  out  of  repair,  if  it  be  possible 
to  repair  it. 

"  I  remember,"  says  Say,  "being  once  a  witness  of 
the  numberless  misfortunes  which  a  neglectful  house- 
keeping entails.  For  the  want  of  a  small  latch,  the  gate 
of  the  poultry  yard  was  forever  open,  there  being  no 
means  of  closing  it  externally,  and  many  of  the  poultry 
were  lost  in  consequence.  One  day,  a  fine  young  pork- 
er made  his  escape  into  the  woods,  and  the  whole  fam- 
ily, gardener,  cook,  milk-maid,  &c.,  presently  turned  out 
in  quest  of  the  fugitive.  The  gardener,  in  leaping  a 
ditch,  got  a  sprain  that  confined  him  to  his  bed  for  a 
fortnight.  The  cook  found  the. linen  burnt  that  she  had 
left  at  the  fire  to  dry.  The  milk-maid  forgot,  in  her 
haste,  to  tie  up  the  cattle  in  the  cow  house,  and  one  of 
the  loose  cows  broke  the  leg  of  a  colt,  that  was  kept 
m  the  same  shed.  The  linen  burnt,  and  the  gaiden- 
er's  work  lost,  were  worth  twenty  crowns,  and  the 
colt  as  much  more,  so  that  forty  crowns  were,  in  a  few 
minutes,  lost,  for  want  of  a  latch  that  would  not  havo 
cost  more  than  a  few  sous.*'  [Pol.  Economy,  Boo); 
JJd,  chap.  5.]  . 

Illustrations  of  the  importance  of  having  every  instru- 
ment  in  order,  and  in  place,  are  occurring  m  most  es- 
tablishments every  day.  They  teach  us,  that  economy 
of  capital,  as  well  as  of  labor,  requires,  that  every  thing 
should  be  done  in  time,  and  in  season  ;  that  if  a  thing 


ECONOMY     OF    LABOR.  377 

neec  to  be  done  lo-day,  we  have  no  means  wl  ich  shall 
onable  us  to  estimate  the  loss  that  may  ensue,  by  put- 
ling  it  off  until  to-morrow  ;  and,  that  negligence  is  as 
much  at  variance  with  the  laws  of  our  Creator,  as  abso- 
lute wastefulness,  inasmuch  as  it  exposes  us  to  equally 
severe  punishments.  It  would  be  well,  if  men  would 
remember  this,  not  only  in  the  affairs  of  this  life,  but 
si  ill  more,  in  the  affairs  of  another. 

Supposing  now  that  both  labor  and  capital  have  been 
invested  upon  the  most  economical  principles.  The 
object  for  which  they  have  been  thus  invested,  is  the 
creation  of  products.  Hence,  the  greater  this  product 
is,  the  more  successful  the  investment,  the  better  is  it 
for  the  individual,  and  the  better  is  it  for  the  «.ommu- 
nity.  The  object  of  the  farmer  is,  with  a  given  soil, 
a  given  expenditure  of  labor,  of  seed  and  of  manure, 
to  raise  the  greatest  amount  of  value^  in  a  harvest. 
This  will  generally^  though  not  always,  be  as  the  quart 
tity.  Fifty  bushels  of  common  apples  will  not  sell  for 
so  much^s  forty  bushels  of  good  ones.  One  hundred 
pounds  of  coarse  wool,  will  sell  for  much  less  than 
one  hundred  pounds  of  fine  wool.  Hence,  his  object 
should  be,  from  a  given  expenditure,  to  derive  the 
greatest  amount  of  profit.  It  is,  by  thus  adjusting  his 
expenditure,  and  thus  calculating  the  results,  that  an 
intelligent  and  thoughtful  farmer  will  grow  rich ;  while 
all  around  him  are  remaining  stationary  or  are  growing 
poor. 

So,  it  is  the  business  of  the  manufacturer  to  create, 
with  a  given  expenditure,  the  greatest  amount  of  value. 
If  he  can  succeed  in  giving  to  his  cloth  a  better  dye,  oi 
cjin  produce  a  more  durable  or  a  more  tasteful  fabiic, 
or  can  adapt  it  better  to  the  satisfying  of  any  human 
want,  its  value  is,  by  so  much,  increased,  and  he  and 
the  community  are  the  better  for  the  increased  value  of 
his  production. 

It  is   evident,  that,  in  order   to  do  this,  a  systematic 

knowledge  of  the  principles  of  any  employment  is  nedts- 

sary  to  the  individual  by  whom  it  is  carried  on.     A  man, 

*»n  order   to  be   a  skilful  producer,  must   be  acquainted 

32* 


378  EcoNOMy    oi    labor. 

with  the  laws  of  production  that  is,  those  laws  of  na- 
ture and  of  society,  which  govern  the  transaction  in 
which  he  is  engaged.  Hence,  we  see  the  importance  of 
accurate  knowledge,  and  sound  mental  discipline,  to  all 
the  classes  of  society. 

We  see,  in  the  above  remarks,  another  illustration  of 
the  truth,  that  the  benefit  of  one  is  the  benefit  of  all, 
and  the  injury  of  one  is  the  injury  of  all.  If  a  man 
economize  labor  and  capital,  he  increases  his  own 
wealth,  and  he  also  rescues  as  much  as  he  saves,  from 
actual  destruction.  The  whole  of  this  amount  may  go 
to  the  further  increase  of  production,  or  to  the  satisfying 
of  human  wants.  The  more  he  produces,  the  greater  is 
his  weahh  ;  and  the  greater  is  the  value  which  is  created 
for  the  good  of  the  whole  community.  Hence,  we  see, 
that  he  who  is  honestly  promoting  his  own  welfare,  is 
also  promoting  the  welfare  of  the  whole  society  of  which 
he  is  a  member. 

And  as  it  is  manifestly  for  the  interest  of  the  individ- 
ual, so  is  it  for  the  interest  of  the  society,  that  every 
producer  should  consume  as  little  value,  and  pr'oduce  as 
great  value,  as  possible.  Hence,  we  see  the  impolicy 
of  those  restrictions,  which  will  not  allow  the  individual 
to  purchase  and  to  sell  where  he  pleases.  If  he  must 
give  a  higher  price  than  is  necessary  for  his  material,  this 
is,  by  the  difference,  unprofitable  consumption.  If  he 
cannot  dispose  of  it  where  he  pleases,  this  is,  by  so 
much,  unprofitable  production,  because  he  is  unable  to 
realize  from  his  production  as  much  as  he  w  ouJd  be  able 
to  realize,  were  he  left  to  himself. 


OF    PERSONAL     EXPENSES.  37'J 


SECTION  II. 

or    CONSUMPTION    FOR    THE    GRATIFICATION    OF 
DESIRE. 

By  means  of  the  productive  consumption  above  treat- 
ed of,  a  man  procures  the  means  for  this  second  kind  of 
consumption  This  means,  however,  it  is  always  to  be 
remembered,  does  not  consist  of  his  whole  production, 
but  only  of  the  excess  of  production  over  consumption 
If  he  live  on  capital  loaned  at  interest,  the  case  is  the 
same.  The  money  loaned  is,  for  the  time,  consumed. 
The  interest  paid,  is  the  excess  of  the  production  over 
the  consumption,  and  this,  of  course,  is  all  that  he  can 
appropriate  to  the  gratification  of  his  desires. 

Consumption  for  the  gratification  of  our  desires,  may 
be  considered  from  two  points  of  view.  First.  Without 
reference  to  the  circumstances  of  the  individual,  or  tp 
the  relative  value  of  the  various  modes  of  gratification  : 
and,  secondly,  with  reference  to  these  circumstances. 

I.  Of  cons^imption  without  reference  to  the  circum- 
stances of  the  individual,  or  the  relative  valv£  of  the  mode 
of  gratification. 

These  purposes  have  been  already  alluded  to.  They 
are  generally  comprehended  under  the  following  partic- 
ulars : 

Expenditures  for  the  necessaries  and  conveniences  of 
living,  as  food,  clothing,  and  shelter ;  lor  the  gratification 
of  the  senses  and  the  tastes  ;  fer  the  pleasures  of  intel- 
lect ;  for  the  pleasures  of  society  ;  and  for  moral  pleas 
ures.  Under  one  or  other  of  these  simply,  or  under 
'seveial  of  them  combined,  I  believe  almost  all  of  our 
expenditures  may  be  cla<;sed. 

Now  if  these  be  considered,  irrespective  of  our  cir- 
cumstances, or  of  the  intrinsic  value  of  the  gratifications 
iliemselves,  the  principles  of  expenditure,  will  be,  essen- 
tially, the  same  as  those  which  have  been  already  illus- 
trated.    That  i^  to  say,  if  a   particular  mode  of  living 


390  OF  PERSONAL  EXPENSES. 

or  the  enjoyment  of  a  particular  gratificalion  bt  determin- 
ed upon^  whether  that  determination  be  wise  or  unwise, 
economy  teaches  us  to  obtain  it  most  perfectly,  and  at 
ihe  least  possible  expense.  The  question  of  its  wisdoih 
or  folly,  belongs  to  another  part  of  the  subject.  A  par- 
ticular mode  of  living  having  been  resolved  upon,  econ- 
omy will  teach  us  to  sustain  it,  at  the  least  possible 
expense.    Hence,  in  regard  to  capital,  the  rules  will  be  * 

1.  That  the  consumption  of  values  be  as  small  as  is 
consistent  with  the  accomplishment  of  our  purpose. 
This  is  opposed  to  several*  errors. 

To  purchasing  more  of  any  value  than  is  wanted. 
The  articles  ordinarily  consumed  in  a  family,  are  rapidly 
destructible.  If  more  be  purchased  than  is  wanted,  it  is 
liable  to  become  useless,  and,  in  this  case,  the  loss  of 
this  excess  is  total.  By  having  a  superabundance  of 
any  thing  consumable,  it  becomes,  in  the  eyes  of  those 
who  use  it,  less  valuable,  and  •  is  used  less  carefully. 
And,  if  neither  of  these  results  be  experienced,  if  an 
article  be  purchased  a  year  before  it  is  wanted,  the  pur- 
chaser loses  the  interest,  for  a  year,  of  the  money  expend- 
ed. Hence,  it  is  generally  as  economical  to  purchase 
at  retail,  as  at  wholesale. 

Hence,  it  is  commonly  wasteful  to  purchase  any  thing 
because  it  is  cheap.  If  a  man  need  any  thing,  its  cheap- 
ness is  a  reason  why  he  should  buy  it,  but  if  he  do  not 
want  it,  its  cheapness  is  no  reason  at  all.  A  man  may 
buy  stones  very  cheap,  but  it  is  doubtful  whether  he 
would  be  either  enriched  or  made  happier  by  the  pur- 
chase. Many  a  garret  is  filled  with  great  bargains ; 
which  were  purchased  because  they  were  cheap,  and 
then  laid  away  to  rot. 

2.  The  consumption  should  be  as  perfect  as  possible. 
When  we  have  possessed  ourselves  of  a  substance,  it 
should  not  be  thrown  away,  until  every  utility  which  it 
possesses,  has  teen  exhausted. 

Thus,  an  ailicle  of  clothing  which  will  not  answer 
any  longer  for  one  purpose,  may  answer  very  well  for 
another.  An  article  of  food,  which  may  not  be  used  in 
one  form,  may   be   used   in   some   other   form.     And 


OF  PERiCNAL  F.XPENSES.  o8I 

hence,  in  general,  nothing  should  come  into  a  house,  un- 
less it  be  wanted,  nor  in  a  larger  amount  than  it  is  want- 
ed ;  and  nothing  should  leave  it,  until  all  its  utility  is 
exhausted. 

3.  All  the  means  should  be  provided  for  the  most 
perfect  production  and  consumption  of  values.  Hence, 
every  useful  utensil  should  be  furnished,  and  should  be 
tiie  most  perfect  of  its  kind.  It  is  cheaper  to  buy  a 
coal-hod,  than  to  carry  coal  in  a  basket,  and,  by  saving 
a  dollar  in  a  utensil,  ruin  a  carpet  worth  fifty  dollars.  It 
is  cheaper  to  have  every  description  of  culinary  vessel 
that  may  be  needed,  than  to  have  food  spoiled  by  being 
cooked  in  an  unsuitable  instrument.  It  is  cheaper  to 
have  a  bad  fire  place  altered,  at  an  expense  of  fifteen 
dollars,  than  to  consume  annually  ten  dollars  more  worth 
of  wood  than  is  necessary. 

Hence,  it  is  also  important,  that  every  article  pur- 
chased be  of  such  a  nature  as  will  admit  of  the  most 
profitable  consumption.  If  a  man  buy  fuel  which  gives 
off  very  little  heat,  because  it  is  at  a  low  price,  it  is  by 
no  means  certain  that  he  has  made  a  successful  pur- 
chase. It  should  always  be  remembered  that  we  want 
a  given  amount  of  utility,  and  not  the  mere  t'orm  m 
which  it  seems  to  reside.  It  is  cheaper  to  purchase  a 
dollar's  worth  of  utility  for  a  dollar,  than  half  a  dollar's 
worth  for  seventy-five  cents.  Hence,  the  lowest  priced 
products  are  by  no  means  always  the  cheapest. 

The  same  principles  apply  to  labor. 

Economy  directs,  that  in  a  household,  we  should  pur- 
chase as  much  labor  as  we  need,  and  of  the  kind  that 
we  need,  but  no  more  than  we  need.  When  we  pay 
for  useless  labor,  we  throw  money  away  ourselves. 
When  we  employ  incomp  stent  labor,  we  pay  others  to 
throw  it  away  for  us. 

These,  I  suppose  to  be  the  principal  circumstances, 
which  should  govern  our  expenditures.  And,  it  will  be 
seen,  that  they  apply  to  hU  the  conditions  of  men. 
Whether  our  exj)enditure  be  large  or  small,  it  should  be 
conducted  with  economy.  The  object  to  be  attained 
'St  to  secure  as  large  an  amount  of  gratification,  at  aa 


383  or  PERSONAL  EXPENSES. 

small  an  expenditire  as  possible.  To  the  man  who 
has  but  two  hundred  dollars  per  year  to  spend,  it  is  cer- 
tainly important  to  spend  it  economically.  To  the  man 
who  has  ten  thousand  dollars  per  year,  it  will  generally 
be  found  convenient. 

Hence,  it  will  be  seen,  that,  in  order  to  enjoy  the 
comforts  or  the  luxuries  of  life,  at  the  least  expense, 
care  and  superintendence,  and  knowledge  of  the  various 
operations  performed  in  a  household,  are  absolutely  ne- 
cessary. And  as  this  department  of  consumption  in  gen- 
eral, devolves  upon  the  mistress  of  a  family,  we  see  how 
important  to  the  execution  of  it  with  success,  must  be 
vigilance,  care,  intelligence,  and  industry.  The  husband, 
by  the  employment  of  capital,  labor,  and  skill,  in  pro- 
ductive consumption,  secures  an  annual  revenue,  for  the 
purpose  of  consumption  in  the  various  means  of  gratifi- 
cation, whether  necessary  or  superfluous.  The  expen- 
diture of  this  annual  revenue,  or  the  making  of  those 
arrangements  which  govern  the  expenditure,  generally 
devolves  upon  the  wife.  If  that  expenditure  be  made 
without  economy,  either  the  gratifications  which  it  might 
procur*^,  are  never  enjoyed  ;  and,  by  all  the  consumption, 
neither  comfort  nor  pleasure  is  obtained  ;  or  else,  if  the 
gratification  sought  for  be  obtained,  it  is  obtained  at  an 
expense  absolutely  ruinous.  Hence,  it  will  be  seen, 
that  the  physical  comfort,  as  well  as  the  means  of  hap- 
piness of  both  parties,  depends  more  on  the  domestic 

\    education  of  the  female  sex  than  is  ordinarily  supposed. 

I  '  Affection  will  rarely  exist  in  the  atmosphere  of  self- 
inflicted  poverty.  No  man  can  respect  a  woman,  by 
whose  caprice,  and  ignorance  of  her  appropriate  duties, 
he  is  plunged  into  disgraceful  bankruptcy,  and  wedded 
to  hopeless  penury.  Nor  let  it  be  supposed  that  no  tal- 
ent is  requisite  skilfully  to  superintend  a  household.  If 
requires,  at  least,  as  much  ability  to  direct,  with  skill, 
and  on  principle,  the  affairs  of  a  domestic  establishment, 
as  to  select  a  ribbon  or  dance  a  minuet,  to  finger  a  piano 
or  to  embroider  a  fire  screen. 

II.  Consumption  considered  in  respect  to  the  relative 
value  of  the  desire. 


OF    DIFFERENT    MODES    OF    CONSUMPTION-       3853 

The  various  objects  of  desire,  by  the  possession  of 
which  our  happiness  may  be  promoted,  may,  with  suffi- 
cient accuracy  for  our  present  purpose,  be  divided  into 
moral,  intellectual,  social,  and  sensual. 

The  attainment  of  happiness  from  ♦  either  of  these, 
commonly  involves  some  expenditure  of  time,  or  of 
property,  or  of  both.  Thus,  we  cannot  by  reflec  lion, 
improve  our  own  hearts,  without  the  consumption  of 
f.ime,  nor  cultivate  our  benevolent  sentiments  without  the 
consumption  of  property.  The  improvement  of  oui 
minds  by  reading  and  study,  demands  both  time  and 
books.  We  cannot  enjoy  the  society  of  our  friends, 
without  the  consumption  of  both  time  and  property. 
And  every  one  knows  that  the  gratification  of  our  sens- 
es, whether  intellectual  or  corporeal,  consumes  a  large 
portion  of  the  income  of  every  individual. 

It  belongs  to  the  teacher  of  ethics,  to  show  in  which 
mode  of  expenditure  a  man  may  best  secure  his  future 
happiness,  and  act  most  worthily  of  the  moral  nature 
with  which  he  is  endowed.  The  political  economist 
looks  upon  the  various  modes  of  expenditure,  simply  aii 
they  affect  the  wealth  of  the  individual,  and  of  the  pub- 
lic. Yet,  even  in  this  vie^,  it  may  not  be  inappropriate 
to  offer  a  single  suggestion.  Inasmuch  as  we  have  been 
created  with  aptitudes  for  all  these  different  modes  of 
happiness,  it  is  manifestly  the  intention  of  the  Creator, 
that  we  should  enjoy,  not  merely  one  but  all  of  them. 
As  we  are  not  merely  sensual,  but  also  moral  and  intel- 
lectual beings,  it  is  as  reasonable  tbat  we  should  expend 
a  part  of  our  time  and  property,  in  the  pursuit  of  moral 
dud  intellectual,  as  that  we  should  spend  a  part  of  it,  in 
the  pursuit  of  sensual  gratifications.  He  who  argued 
from  the  superior  dignity  of  our  nature  over  that  of 
brutes,  might  perhaps  urge  that  the  former  was  tne  more 
reasonable  mode  of  expenditure.  But  the  dignity  of  the 
race  not  belonging  to  the  province  of  the  political  econ- 
omist, we  shall  not  consider  the  subject  in  this  point  of 
view. 

The  principles  upon  which  political  economy  would 
inach  us  to  select  our  modes  of  gratification,  arc,  I  sup 


384       OP    DIFFERENT    MODES    OF    C0^  SUMPTION. 

pose,  the  following.  First.  Where  the  amount  of 
gratification  in  two  cases  is  equal,  it  is  wise  to  choose 
that  which  is  the  least  expensive.  The  reason  for  ihij 
is  loo  obvious  to  need  much  illustration.  If  a  particular 
gratification  can  be  procured  for  one  hundred  dollars, 
and  another,  which  will  afford  an  equal  amount  of  happi- 
ness, can  "be  procured  for  ten  dollars,  the  cheaper  is  to 
be  preferred  ;  because,  while,  in  this  case,  we  obtain  an 
equal  gratification,  we  have  ninety  dollars  remaining  with 
which  to  purchase  other  objects  of  desire.  Secondly. 
When  two  modes  of  gratification  are,  in  themselves, 
equally  productive  of  happiness,  but  of  which,  one  tends 
to  the  wealth,  and  the  other  to  the  poverty,  both  of  the 
individual  and  of  society,  the  former  is  to  be  preferred. 
Thus,  if  it  cost  the  same  sum  to  spend  an  evening  in  in- 
tellectual improvement,  that  it  would  cost  to  spend  it  in 
a  drunken  frolic,  and  the  pleasure  in  the  two  cases  were 
the  same  ;  inasmuch  as  intellectual  cultivation  tends  to 
knowledge,  which  is  a  valuable  consideration  to  every 
producer,  and  a  drunken  frolic  has  no  such  tendency, 
economy  would  teach  us  to  spend  the  evening  in  intellec- 
tual cultivation.  ^ 

If,  now,  we  compare  the  various  modes  of  expendi- 
ture most  common  among  men,  I  think  that  we  shall  find, 
that  the  economy  of  the  moral  and  intellectual  pleasures 
is  somewhat  overlooked. 

The  expenditures  for  all  the  real  wants  and  conven- 
iences of  a  human  being,  may,  by  industry  and  frugality, 
without  great  difficulty,  be  supplied.  It  does  not  cost 
much,  to  provide  all  that  we  need  for  wholesome  and 
palatable  food,  for  comfortable  clothing  and  shelter,  and 
for  all  the  furniture  demanded  for  convenient  domestic 
arrangements.  Our  greatest  expenses  are  for  those  ob- 
jects, which  yield  no  other  utility  than  the  mere  gratifi- 
cation of  the  senses,  or,  which  are  rendered  necessary, 
by  command  of  fashion,  or  the  love  of  ostentation. 
Thus,  in  the  purchase  of  a  garment,  or  of  an  article  of 
furniture,  a  part  of  the  price  is  paid  for  the  real  utility 
which  it  possesses,  and  the  remainder  for  that  particular 
form,  or  color,  or  workmanship,  which  is  designated  b^ 


OF    DIFFERENT    MODES    OF    CONSUMPTlOrf.       385 

fashion.  Now,  it  frequently  happeng,  that  this  laitei 
portion  of  the  price  is  far  greater  tiian  the  former.  The 
same  may  be  said  of  many  of  our  expenses  of  the  table, 
and  of  various  others. 

Now,  that  men  should  not,  if  they  have  the  ability,  in 
any  manner  gratify  their  senses,  and  yield  obedience  to 
fashion,  it  is  not  necessary  here  to  affirm  ;  nor  is  it  ne- 
cessary that  political  economy  should  prescribe  the  llniii, 
within  which  these  gratifications  shall  be  confined.  A 
few  considerations,  for  the  sake  of  illustrating  the  com- 
parative economical  advantages  of  other  modes  of  grati- 
fication, is  all  that  will  be  here  attempted. 

1.  Moral  and  intellectual  pleasures  are  by  no  means 
expensive.  To  spend  time  in  moral  cultivation,  is  no 
more  expensive  than  to  spend  it  thoughtlessly  and  frivo- 
lously. The  time  consumed  in  tiioughtless  dissipation, 
if  employed  in  moral  culture,  would  be  sufficient  to  effect 
great  changes  in  our  habits  and  tastes. 

The  pleasures  of  benevolence,  so  far  as  pecuniary 
consumption  is  concerned,  are  less  expensive  than  those 
of  the  senses.  Were  the  sums  lavished  in  thoughtless 
caprice,  in  obedience  to  fashion,  or  in  the  gratification 
of  appetite,  to  be  reserved  for  charity,  how  great  an 
amount  of  happiness  might  be  created  both  in  the  bene- 
factor and  the  recipient. 

The  same  may  be  said  of  intellectual  pleasures 
Books,  and  all  the  means  for  intellectual  gratification, 
may  be  had  at  an  expense  within  the  reach  of  a  very 
(arge  class  of  the  community.  The  useless  ornaments 
of  a  drawing  room,  would  frequently  purchase  a  consid- 
erable library.  The  sums  of  money  annually  paid,  by 
most  families,  to  satisfy  the  demands  of  fashion,  would 
piovide  them  with  as  much  reading  as  they  would  desire. 
Now,  when  these  two  kinds  of  pleasure  are  equally  set 
before  us,  and  when  the  one  may  be  procured  at  so 
much  less  expenditure  than  the  other,  it  surely  is  worth 
the  attention  of  every  man,  deliberately  to  inquire  by 
which  mode  of  investment  he  will  best  secure  his  own 
happiness.  There  seems  something  ill-adjusted,  when 
iho  habitation  of  a  moral  and  intellectual  being,  reniindi* 
33 


386       OP    DIFFERENT    MODES    OF    CONSUMPTION. 

US  of  every  thing  else  than,  that  he  is  either  moral  or  in 
tellectual. 

2.  Moral  and  inlellectual  pleasures  tend  to  the  wealth 
both  of  the  individual  and  of  society. 

The  exercise  of  benevolence  has  several  important 
economical  tendencies.  For  instance,  it  tends  directly 
to  cultivate  the  habits  of  self-denial  and  self-government, 
which  are  so  essential  both  to  industry  and  frugality. 
Sensual  self-indulgence  tends  directly  to  produce  both 
indolence  and  capricious  and  reckless  expenditure. 

Again.  The  habit  of  benevolence  tends  to  moderate 
and  correct  that  intense  love  of  gain,  which  is  so  fre- 
quently the  cause  of  ruin  to  enterprising  men.  In  the 
management  of  any  hazardous  business,  he  will  be  the 
most  likely  to  succeed,  who  looks  with  entire  coolness 
on  the  chances  of  loss  and  gain.  The  too  eager,  gov- 
erned by  their  imagination,  rush  into  needless  danger. 
The  too  cautious  allow  a  fair  prospect  of  advantage  to 
pass  by  unimproved.  The  one  is  as  liable  to  fail  as  the 
other.  He  who,  by  the  practice  of  benevolence,  has 
learned  a  more  accurate  estimate  of  the  blessings  of 
wealth,  will  more  probably  than  either,  judge  correctly. 
The  miser  and  the  sensualist  will  fall  into  opposite  ex- 
tremes, one  upon  each  side  of  him. 

Besides,  the  social  benefits  of  benevolence  are  incal 
culable.  It  unites  together  the  various  classes  of  men 
by  the  strong  ties  of  affection  and  gratitude.  By  bring 
ing  all  classes  of  men  more  directly  under  the  view  of 
the  whole  mass  of  society,  social  responsibility  is  in 
creased,  and  the  encouragements  to  virtue  and  the  re- 
straints upon  vice  are  strengthened.  When  the  rich  are 
hard-hearted  and  luxurious,  the  poor  are  disaffected, 
anti-social,  and  destructive.  In  so  far  as  benevolence, 
therefore,  tends  to  the  improvement  of  the  social  dispo- 
sitions of  men,  it  may  lay  claim  to  great  economical  ad- 
vantages. 

And  the  same  is  true  of  intellectual  pleasures.  A 
man  cannot  enjoy  these  without  improving  his  mind,  and 
rendering  it  a  more  valuable  instrument  both  for  the  pro- 
duction of  his  future  happiness,  and  the  accumulation  of 


OP    DIFFERENT    MODES    OF    CONSUMPTION.       387 

wealth.  Knowledge  is  power,  in  what  sphere  of  life 
soever  it  be  exerted.  The  gratification  of  the  senses 
enervates  the  body,  enfeebles  the  mind,  and  tends  to 
render  intellectual  exercise  unpleasant,  and  to  nnfif  us 
for  any  importan  Oi  bisj;hly  responsible  exertion. 


CHAPTER  THIRD 

OF    PUBLIC    CONSUMPTION 


SECTION  I. 

OP    TAXES,    OR    THE    MANNER    IN    WHICH    PUBLIC 
EXPENDITURE     IS    PROVIDED     FOR. 

We  have  thus  far  treated  of  individual  consumption, 
or  of  that  destruction  of  values  effected  by  the  individ- 
ual, in  the  accomplishment  of  his  own  purposes  ;  and  for 
the  gratification  of  his  own  desires.  But,  all  the  capital 
produced  by  a  society,  is  not  expended  in  this  manner 
A  part  of  the  annual  revenue  of  every  individual,  is  con- 
tributed in  some  manner  to  the  public,  and  is  expended 
by  the  agents  of  the  public,  that  is,  by  the  government. 
This  part  remains  to  be  treated  of,  under  the  head  of 
public  consumption. 

This  expenditure  is  provided  for  by  means  of  taxation. 
When  a  given  sum  is  to  be  raised  for  the  accomplish- 
ment of  any  object,  it  is,  by  some  mode  of  assessment, 
distributed  among  the  various  individuals  of  the  commu- 
nity, and  every  one  is  obliged  to  pay  the  proportion  with 
which  he  is  charged.  The  sum  thus  collected  is  then, 
for  the  accomplishment  of  particular  purposes,  consumed 
by  the  agents  into  whose  hands  it  is  delivered.  The 
consumption  itself  is  of  precisely  the  same  nature  as  lliHt 
effected  by  individuals,  that  is,  the  value  is  destroyed  ; 
and  the  utility  consumed,  is  annihilated.  If  an  individual 
burn  gunpowder,  the  value  in  time  and  material  by  which 
it  was  produced  is  destroyed  ;  if  a  hundred  or  a  thousand 
men  do  it,  the  result  is  the  same.  If  a  man  in  the  dig- 
ging of  a  ditch  consume  the  labor  of  a  thousand  work- 


OF    PUBLIC    EXPENDITURE.  389 

men,  and  use  the  provisions  necessary  for  their  susten- 
lation,  the  whole  value,  thus  expended,  is  annihilated. 
And  if  a  thousand  men  unite  in  the  undertaking,  the  an- 
nihilation is  the  same.  This  is  really  so  evident,  that  to 
illustrate  it  at  length  seems  almost  childish.  Does  any 
one  doubt  when  a  house  is  burnt  down,  whether  the  value 
of  a  house  is  or  is  not  consumed,  because  the  owner  did 
not  set  fire  to  it  himself.  Does  any  merchant  doubt, 
whether  his  property  is  diminished  or  not,  when  it  has 
been  wasted  by  a  profligate  clerk  ?  In  a  word,  govern- 
ment is  nothing  but  a  system  of  agencies  ;  and  property 
consumed,  by  the  government,  is  as  really  consumed, 
and  its  value  as  really  destroyed,  as  though  the  individual 
citizens  consumed  it  themselves. 

Now,  this  being  the  fact,  the  rule  by  which  consump- 
tion is  to  be  judged  of,  is  precisely  the  same,  whether  it 
be  public  or  private.  If  the  product  created  by  the 
consumption,  whether  that  product  be  material  or  imma- 
terial, be  of  greater  value  than  the  product  consumed,  it 
IS  profitable  consumption  ;  that  is,  the  public  receive  in 
return  a  greater  value  than  they  parted  with.  If  a  less 
valuable  product  be  created,  than  is  consumed,  it  is  un- 
profitable consumption,  and  the  value  might  better  have 
remained  in  the  hands  of  individuals.  If  no  product 
whatever  be  realized,  it  is  a  total  loss  ;  and  the  value 
taken  from  the  individual  might  as  well  have  been  thrown 
into  the  sea.  Nay,  had  they  themselves  thrown  the  val- 
ue consumed  into  the  sea,  there  would  have  been  a  gain, 
in  the  amount  of  the  expense  of  collecting  and  consuming 
it.  And  still  more,  if  the  value  consumed  produce  no 
valuable  result,  but,  on  the  contrary,  be  employed  to 
promote  the  purposes  of  oppression  and  misrule,  the 
evil  is  enormous.  The  possessions  of  the  individual  are 
taken  away,  not  only  without  rendering  him  an  equiva- 
lent, but  for  the  sake  of  employing  other  men  to  torment 
him,  and  deprive  him  of  his  dearest  rights. 

It  is  very  frequently  asserted,  that  pubhc  expenditure 
enriches  a  country,  or  that,  at  least,  it  is  wholly  inno- 
cent, since  it  quickens  the  circulation  of  money,  and 
does  no  harm,  inasmuch  as  all  the  money  always  remains 
33* 


390  CP    PUBLIC    EXPENDITURE. 

in  tne  country.  To  obviate  such  an  objeclion,  Iftt  m 
trace,  from  first  to  last,  the  passage  of  a  product  towarda 
uhiiTiate  consumption,  on  the  public  account.  'JMie  gov- 
ernment exacts  from  the  tax  payer,  the  payment  of  a 
given  sum  in  the  shape  of  money.  To  meet  this  de- 
mand, the  tax  payer  exchanges  part  of  the  products  at 
his  disposal,  for  coin,  which  he  pays  to  the  tax  gatherer. 
A  second  set  of  government  agents  is  busied,  in  buying, 
with  that  coin,  clothing  and  other  necessaries  for  sol- 
diery Up  to  this  point,  there  is  no  value  either  lost  or 
consumed  ;  there  has  only  been  a  gratuitous  transfer  of 
value  and  a  subsequent  act  of  barter,  but,  the  value  con- 
tributed by  the  citizen,  still  exists  in  the  shape  of  stores 
and  supplies  in  the  military  depot.  In  the  end,  how 
ever,  this  value  is  consumed,  and  then  the  portion  of 
wealth  which  passes  from  the  hands  of  the  tax  payer, 
into  those  of  the  tax  gatherer,  is  destroyed  and  annihilated 

"  Yet,  it  is  not  the  sum  of  money^  that  is  destroyed  ; 
that  has  only  passed  from  one  hand  to  another,  either 
with  or  without  any  return,  as,  when  it  passed  from  the 
tax  payer,  to  the  tax  gatherer  ;  or  in  exchange  for  an 
equivalent,  as  when  it  passed  from  the  government  agent 
to  the  contractor,  for  clothing  and  supplies.  The  value 
of  the  money  survives  the  whole  operation,  and  goes 
through  three  or  four,  or  a  dpzen  hands,  without  any  sen- 
sible alteration.  It  is  the  value  of  the  clothing  and  ne- 
cessaries that  disappears,  with  precisely  the  same  effect, 
as  if  the  tax  payer  had,  with  the  same  money,  purchased 
clothing  and  necessaries  for  his  own  private  consump- 
tion." * 

The  consumption,  then,  is  of  the  same  nature,  wheth- 
er it  be  public  or  private.  It  is  a  destruction  of  value ; 
and  the  rule,  by  which  we  are  to  determine  whether  it 
be  |)rofitable  or  unprofitable,  is  the  same  in  both  cases. 
It  is,  by  inquiring,  whether  the  benefit  created  by  the 
consumption,  is  greater  than,  equal  to,  or  less  than,  the 
ralue  of  the  product  consumed. 

While,  however,  this  rule  is  always  to  be  adopted,  it 
is.  as  in  the  case  of  individual  consumption,  to  be  inter- 

•  Say 


OF    PUBLIC    EXPENDITURE.  391 

preted  with  a  liberal  and  intelligent  forecast.  It  must 
not,  of  course,  always  be  expected,  that  the  product 
created  by  consumption,  will  be  a  visible,  tangible,  ma- 
terial substance.  Thus,  we  see  no  physical,  tangible 
product,  as  the  result  of  taxes  for  the  support  of  civil 
government.  But,  we  receive  the  benefit  in  security  of 
persons,  property,  and  reputation  ;  or  in  that  condition 
of  society,  which,  though  it  be  incapable  of  being 
weighed  and  measured,  is  absolutely  essential  both  to  in- 
dividual happiness,  and  individual  accumulation.  The 
same  may  be  said,  in  substance,  concerning  the  taxes 
paid  for  general  education.  Here,  whether  the  tax  pay- 
er receive  his  remuneration  in  instruction  given  to  his 
own  children,  or  not,  he  yet  receives  it,  in  the  improve- 
ment of  the  intellectual  and  social  character  of  his  neigh- 
bors, by  which  his  property  is  rendered  more  secure, 
the  labor  for  which  he  pays  is  better  performed,  and  the 
demand  for  whatever  he  produces,  is  more  universal  and 
more  constant.  The  same  may  be  said  of  that  public 
expenditure,  by  which  the  moral  and  social  character  of 
a  community  is  elevated,  the  taste  of  a  nation  refined, 
and  an  impulse  given  to  efforts  for  the  benefit  of  man. 
^ith  this  view,  no  one  could  oppose  the  expense  incur- 
red in  bestowing  upon  public  edifices  elegance,  or  even, 
in  some  cases,  magnificence  of  structure  ;  in  the  public 
celebration  of  remarkable  eras  ;  and  ii*  the  rewards  be- 
stowed upon  those  who  have  by  their  discoveries  enlarged 
the  boundaries  of  human  knowledge,  or,  by  their  inven- 
tions, signally  improved  the  useful  arts.  Political  Econ- 
omy is  opposed  to  none  of  these  forms  of  expenditure  ; 
all  that  she  requires  is,  that  a  valuable  consideration  be 
received  in  return  for  the  consumption  ;  and  that  the. 
consumption  be  rot  disproportionate  to  that  considera- 
tion. 

Of  Ihe  different  modes  by  vohich  the  public  expendi- 
ture is  provided  for. 

Taxes  are  of  two  kinds,  direct  and  indirect. 

A  direct  tax,  is  a  certain  amount  assessed  upon  every 
individual,  in  proportion  to  the  property  which  he  is 
known  to  possess.     In  many  of  the  towns  of  New  Eng- 


393  OF    PUBLIC    EXPENDITURE. 

land,  an  annual  lax  list  is  made  out,  in  which  the  portion 
which  every  taxable  inhabitant  must  pay,  towards  sup- 
})orting  the  expenses  of  the  district,  is  specified.  The 
apportionment  is  made  out  by  persons  appointed  for  the 
l)urpose,  .called  assessors.  If  any  individual  consider 
himself  as  taxed  too  highly,  he  is  at  liberty  to  appear, 
and  declare  upon  oath,  the  amount  of  property  of  which 
he  is  possessed.  His  assessment  is  then  graduated,  ac« 
cording  to  the  amount  to  which  he  has  sworn. 

An  indirect  tax,  is  levied  upon  articles  of  production, 
at  some  period  during  their  passage  from  one  possessor 
to  another.  Thus  a  tax,  or  as  it  is  called  a  duty,  is  laid 
by  this  country  on  various  goods  imported  from  abroad, 
immediately  on  their  arrival.  This  duty  is  paid  by  the 
merchant  who  receives  them  ;  and  he  adds  this  duty  to 
(he  cost  of  the  goods,  when  he  sells  them  to  the  next 
purchaser.  Thus,  the  price  of  the  product  is  raised,  by 
this  amount,  when  it  comes  into  the  hands  of  the  con- 
sumer. If  broadcloth  pay  a  duty  of  two  dollars  a  yard, 
he  who  buys  a  yard  of  broadcloth  pays  two  dollars  a 
y^ard  more  for  it  than  he  would  pay  if  there  were  no  du- 
ty to  be  paid.  If  coal  be  taxed  two  dollars  a  ton,  as  it 
is  at  present,  every  consumer  of  foreign  coal  pays  t\v% 
dollars  a  ton  more  than  he  would  pay  if  no  such  tax 
were  exacted.  The  effect  of  this  tax  is  also  to  keep 
the  price  of  all  ether  coal  two  dollars  a  ton  higher  than 
it  would  otherwise  be. 

Now,  supposing  the  same  sum  were  to  be  demanded 
for  the  service  of  the  public,  it  may  be  asked,  which 
mode  of  raising  it  is  to  be  preferred. 

In  favor  of  an  indirect  tax  it  may  be  urged,  that  it  is 
raised  with  more  convenience^  and  less  liability  to  per- 
sonal collision,  between  the  tax  payer  and  the  tax 
gatherer. 

The  imports  of  a  country  are  all  received  at  a 
comparatively  small  number  of  places;  denominated 
ports  of  entry.  Goods  arriving  at  these  places  are  all 
charged  with  the  duty  on  their  arrival  ;  and  thus,  the  co.- 
iection  may  all  be  accomplished  in  a  short  time,  and 
with  very  little  trouble.     Besides,  as  the  importer,  who 


of    PUBLIC    EXPENDITURE.  393 

pays  the  duty,  receives  it  back  again  from  the  purchaser 
of  tlie  goods,  it  seems  to  him  a  matter  of  small  impor- 
tance whether  it  be  high  or  low,  and  he  is  disposed  to 
make  but  little  trouble  about  it.  The  case  is  the  same 
with  every  succeeding  purchaser,  until  it  comes  at  lasl 
to  the  consumer.  The  consumer  may  feel  that  the  prod- 
uct is  dear,  but,  if  it  be  no  dearer  than  it  has  been  be- 
fore, he  thinks  but  little  about  it  ;  and,  if  it*be  some* 
what  dearer  than  formerly,  the  rise  and  fall  in  the  price 
of  goods  is  so  common  a  thing,  that  he  imputes  the  dif- 
ference to  any  other  cause,  as  soon  as  to  the  additional 
duty  paid  to  the  government.  Hence,  it  is  frequently 
said,  that  people  do  not  feel  an  indirect  tax,  which 
means,  I  suppose,  that  they  do  not  know,  either  how 
much  they  pay,  or  when  they  pay,  or  whether  they  pay 
or  not. 

On  the  contrary,  it  is,  doubtless,  the  fact,  that  men 
feel  direct  taxes  more  sensibly,  that  is,  they  know  when 
they  pay  them,  and  how  much  they  pay.  Here,  then, 
is  liability  to  ill  feeling,  and  sometimes  to  resistance  ; 
and,  moreover,  there  is  a  possibility,  that  an  excessive 
parsimony  may  restrict  the  public  means  in  such  a  man- 
ner, as  to  prevent  the  execution  of  works  of  real  utility, 
if  not  of  imperative  necessity. 

There  is,  however,  a  greater  liability  of  injustice  in 
indirect  than  in  direct  taxation.  As,  when  duties  are 
laid  upon  goods,  the  tax  payer  knows  very  I'ttle  of  the 
amount  paid,  and  is  hence  less  careful  to  mquire  on 
what  principles  the  revenue  is  raised  ;  there  is  a  greater 
opportunity,  afforded,  in  this  manner,  of  imposing  the 
public  burdens  unequally,  and  of  imposing  them  for 
purposes  at  variance  with  the  principles  of  the  social 
foinpact.  Hence,  a  majority  may  impose  taxes  for  the 
benefit  of  a  part,  and  not  for  the  benefit  of  the  whole  ; 
and  the  matter  can  easily  be  so  mystified,  that  the  suf- 
ferer can  excite  but  little  sympathy.  I  do  not  deny 
that  direct  taxation  is  liable,  in  some  cases,  to  the  same 
abuse,  as,  f^r  instance,  when  the  city  and  country  inter- 
ests strive  f)  shift  the  burden  of  taxation  upon  each  oth- 
er,     I  onl}  say,  that  the  evil  is   not  so  liable  to  happen 


394  OF    PUBLIC    EXPENDITURE. 

in  the  one  case  as  in  the  other,  and  when  it  does  hap- 
pen, it  is  more  readily  exposed. 

Aside  from  tlie  irregularity  in  the  assessment  of  indi* 
rect  taxes,  it  may  be  observed,  that,  in  their  very  nature, 
ihey  are  hable  to  objection,  because  they  do  not  im- 
pose the  public  burden  in  any  manner  in  proportion  to 
the  share  which  the  individual  receives  of  public  pro- 
tection. The  indirect  tax  is  paid  by  the  consumer. 
Hence,  he  pays,  not  according  to  the  benefit  which  he 
receives  from  the  existence  of  civil  government,  but  ac« 
cording  to  the  amount  of  production  which  he  consumes. 
Hence,  he  who  possesses  a  million  dollars'  worth  of 
property,  if  he  consume  no  more  than  he  who  lives  by 
his  daily  labor,  will  pay  no  larger  share  of  the  public  bur- 
den. Hence,  a  manifest  inequaHty  is  involved  in  the 
original  conception  of  an  indirect  tax. 

The  same  remark  may,  however,  be  applied  in  part  to 
direct  taxation.  It  may  be  said,  that  the  tax  payer  here 
raises  his  price,  in  such  a  manner  that  he  only  pays  a 
part  of  the  tax  assessed  upon  him,  and  that  the  remain- 
der is  paid  by  the  consumer.  This  is,  in  part,  true,  but 
I  think  not  by  any  means  to  the  extent  that  it  is  true  of 
indirect  taxation  He  whose  actual  property  is  taxed, 
cannot  raise  the  price  of  his  commodities,  with  such  ac- 
curacy as  the  merchant,  but  must  bear  his  proportion 
without  the  ability  of  so  readily  shifting  it  upon  another. 
Hence,  direct  taxes,  if  equally  imposed,  are  commonly 
more  just ;  that  is,  they  derive  the  support  of  govern- 
ment from  the  individuals,  more  in  proportion  to  the 
degree  of  benefit  which  each  derives  from  the  govern- 
ment. 

In  favor  of  direct  taxation,  it  may  also  be  added,  thai 
it  is  decidedly  more  in  harmony  with  the  genius  of  a  re- 
publican or  representative  government.  Such  a  govern- 
ment, proceedis  upon  the  principle  that  the  people  are  the 
fountain  of  power,  and  are  competent  to  govern  them- 
selves. Now,  such  a  government  ought  not,  surely,  to 
act  upon  the  directly  opposite  principle,  that  the  people 
ough'  not  to  know  what  they  pay.,  or  when  or  how  they 
pay.      They  are  tie  party,  from  which,  especially,  noth- 


PRINCIPLES    OF    TAXATIOIf.  395 

ing  of  this  sort  should  be  concealed.  They  should 
Know  whatj  and  how  much.,  they  contribute ;  and,  also, 
in  what  manner  whatever  they  contribute  is  expended, 
ft  is  in  this  knowledge,  and  in  the  judicious  use  of  it, 
that  their  safety  consists.  To  me,  therefore,  the  consid- 
eration, so  frequently  urged  in  favor  of  indirect  taxation, 
that  the  people  do  not  feel  it,  is  one  of  the  strongest 
arguments  against  it.  The  more  a  people  feel  taxation, 
and  the  more  jealously  they  watch  over  the  public  ex* 
penditure,  the  better  it  is  for  them  dnd  for  their  rulers. 

Of  the  principle  by  which  taxation  should  be  regu- 
lated. 

I  have  already  stated  that  the  several  members  of  a 
society,  should  be  taxed  in  proportion  to  the  benefit 
which  they  receive  from  a  government.  Thus,  if  a 
government  protects  for  one  man,  one  hunared  thousand 
dollars'  worth  of  property,  and  for  anotner  only  one 
thousand  dollars'  worth,  the  former  should  pay  one  hun- 
dred times  as  much  towards  the  public  expenses,  as  the 
latter.  So  far  as  this  is  evidently  just.  But  it  may  be 
questioned  whether  justice  might  not  go  somewhat  fur- 
ther, inasmuch  as,  a  percentage  of  his  income,  which 
would  not  abridge  even  the  luxuries  of  the  rich,  might 
materially  curtail  even  the  necessaries  of  the  poor.  But 
whether  the  rich  ought  to  be  taxed  more  than  a  pro  rata 
proportion  or  not,  I  think  it  evident  that  taxes  should  be 
so  arranged,  that  individuals  should,  in  so  far  as  possible, 
pay  in  proportion  to  their  property  ;  that  is,  in  propor- 
tion to  the  amount  of  protection  which  they  receive  of 
the  government.  Now,  inasmuch  as  indirect  taxation, 
if  laid  indiscriminately^  would  apportion  the  public  bur- 
den on  no  5uch  principle,  it  is  evident  that  such  taxa- 
tion should  be  made  discriminately  ;  that  is,  that  articles 
of  necessity  should  be  either  exempt  from  taxation,  or 
taxed  very  lightly ;  and  articles  of  luxury,  or  those  used 
chiefly  by  the  rich,  should  bear  the  greater  part  of  the 
burden. 

This  would  lead  us  to  the  following  conclusions : 

1  Properly  below  a  certain  amount,  might  very 
properly  be  exempt  from  taxation. 


896  PRINCIPLES    OF    TAXATION 

The  poor  man^s  clothes  and  bedding,  his  cow  and  hi& 
pig,  should  never  be  enumerated  among  taxable  prop- 
erty. 

2.  The  necessaries  of  life,  if  taxed  at  all,  should  be 
taxed  ai  the  lowest  rates.  Of  these,  the  rich  and  poor 
must  consume  nearly  equal  quantities.  But  they  con- 
5umt  only  a  fraction  of  the  rich  mail's  income,  while 
ihey  consume  almost  the  whole  of  the  poor  man's  earn- 
ings. A  lax  on  bread  stuffs,  fuel,  coarse  clothing,  or 
iron,  diminishes,  essentially,  the  comforts  and  even  the 
necessaries  of  life,  of  a  very  large  proportion  of  every 
community. 

3.  Taxation  should  be  the  heaviest  upon  articles  of 
luxury  and  ostentation ;  not  for  the  sake  of  interfering 
with  these  modes  of  pursuing  happiness,  but  because 
those  who  are  able  to  expend  in  this  manner,  are  able  to 
bear,  with  the  least  inconvenience,  the  expenses  of  gov- 
ernment. The  conveniences  o(  living,  and  the  means  of 
accumulation,  should  bear  the  next  portion  of  the  bur- 
den. He  who  is  able  to  furnish  himself  with  the  con- 
reniences  of  living,  is  always  able  to  pay  a  portion  of  the 
expenses  of  government  ;  and  lie  who  possesses  means 
of  accumulation,  can  always  devote  some  part  of  that 
wiiich  is  annually  accumulated,  to  pay  for  the  protection 
which  he  receives.  Thus,  carpeting,  is  a  more  6t  sub- 
ject for  taxation  than  bread  stuffs  or  fuel.  Thus,  also, 
a  farmer's  wagon,  or  a  merchant's  ship,  may  justly  be 
taxed,  but  they  ought  not  to  be  taxed  in  the  same  pro- 
portion as  a  gentleman's  coach.  I  have  spoken  of  the 
expenses  of  civil  society,  as  a  public  burden.  Tt  ought, 
however,  to  be  remarked,  that  this  is  one  of  the  burdens 
which  a  good  citizen  should  be  the  most  willing  to  sus- 
t;;n)  ;  as  it  is  a  mode  of  expense,  for  which  he  receives  a 
most  abundant  equivalent.  If  any  one  doubt  this,  let  him 
ask  himself,  what  expense  would  be  necessary  to  secure 
for  him,  and  his  property,  that  protection  which  he  now 
receives  in  return  for  the  trifling  sum  which  he  pays  in 
taxes.  The  sum  paid  for  the  necessary  expenses  of 
r.ivil  government,  is  very  trifling,  when  compared  with 
ihai  V  hich  is  annually  expended  in  journeys  of  pleasure, 


EXPENSES    OF    CIVIL    GOVERNMENT.  397 

in  luxuries  of  the  table,  in  ornaments  of  dress,  na}',  in 
proflignte  amusements,  and  vicious  indulgences.  Every 
^ood  citizen,  while  he  is  under  obligation  vigilantly  to 
watch  over  the  manner  in  which  public  money  is  appro- 
f)riated,  is  bound  to  contribute,  cheerfully  and  liberally 
for  every  purpose  required  by  the  public  good. 

\i  will  scarcely  be  necessary  to  add,  after  what  has 
been  said,  that  a  surplus  revenue  is  a  public  nuisance 
It  gives  to  the  government  a  control  over  the  monetar} 
affairs  of  the  country,  at  the  best,  dangerous  ;  and  a  con- 
trol which  is  very  liable  to  be  exerted  for  the  promotion 
of  party  purposes.  It  hence  gives  an  additional,  an  un- 
necessary, and  a  dangerous  power  to  a  majority,  and 
gives  them  the  means  of  perpetuating  that  power,  indefi- 
nitely. It  is  taking  productive  capital  from  the  hands 
of  the  owners,  and  vesting  it  in  hands  where  there  is 
every  temptation  to  spend  it  uselessly,  if  not  viciously. 
The  world  has  never  yet  seen  a  government  so  pure,  thai 
it  would  not  become  corrupt,  if  a  surplus  revenue  were 
permanently  placed  at  its  disposal.* 


SECTION  II. 

OP    THE    PURPOSES     FOR    WHICH     THE     PUBLIC 
REVENUE    IS    COMMONLY    EXPENDED. 

The  funds  of  the  public,  after  they  have  been  col- 
lected, are  most  commonly  expended  for  some  or  foi 
all  of  the  following  purposes.      The   support   of  Civil 

•  Of  that  portion  of  the  late  surplus  revenue  which  has  bton  dis- 
tributed anion?  the  States,  the  greater  part  has  already  been  nppropri 
aU'd  to  internal  improvcrnenta  of  very  doubtful  utility.  No  man  ran 
look  upon  such  a  waste  of  property'  without  pain,  especially  when  hf 
remembers,  that  these  inilliuns  were  raised  by  obliginff  the  poor  man 
to  i>ay  a  higher  price  for  his  coat,  his  axe,  his  loaf^of  liread,  hii  salt, 
ana  his  fuel 

34 


398  EXPENSES    OF    CIVIL    OOVER.NMEWT. 

Government  ;  Education  of  ibe  pe(-j)le  ;  The  mainteii- 
ance  of  the  institutions  of  Religion  ;  National  improve- 
ments ;  Pauperism  ;  and  War.  Of  these,  we  shall  now 
proceed  to  treat  in  their  order.  The  principles  which 
we  have  already  illustrated,  will,  however,  render  it  un- 
necessary to  consider  them  at  great  length.  A  few  re- 
marks upon  each,  will  be  all  that  we  shall  here  attenif.t 

I.    Of  expenses  for  the  support  of  civil  government. 

This  is  by  far  the  most  necessary  of  any  of  the 
objects  of  public  expense.  Without  government  there 
could  be  no  society  ;  and  without  society,  iliere  could 
neither  be  redress  of  wrong,  nor  security  of  property. 
But  government  cannot  be  administered  without  officers, 
and  no  one  will  devote  himself  to  the  discharge  of  the 
duties  of  Civil  office,  unless  he  be  paid  for  it. 

The  principles  which  should  govern  this  branch  of  ex- 
penditure, are  therefore  few  and  simple. 

1.  Economy  requires,  that  precisely  such  talent  should 
be  employed,  in  the  various  offices  of  civil  government, 
as  may  be  necessary  to  insure  the  discharge  of  the  duties 
of  each  office,  in  the  best  possible  manner.  Many  of 
these  offices,  can  only  be  discharged  successfully,  by  the 
first  order  of  human  talent,  cultivated  by  learning  and  dis- 
cipline, and  directed  by  incorruptible  integrity.  Now  it 
is  certainly  bad  economy,  to  employ  inferior  talent  to  do 
badly,  that  which  can  only  be  of  any  service  when  it  is 
done  well. 

2.  Hence,  the  salaries  of  judicial,  legislative,  and  ex- 
ecutive officers  should  be  such  as  will  command  the  ser- 
vices of  such  talent  as  the  duties  of  each  office  require. 
It  is  most  unwise  parsimony,  to  give  to  a  judge  such 
a  salary  as  will  command  the  services  of  nothing  more 
than  a  third  rate  lawyer  ;  and  it  is  mean  to  ask  an  indi- 
vidual to  do  a  service  for  the  community,  at  a  lower  rate 
than  that  at  which  he  would  do  it  for  an  individual. 

In  answer  to  this,  it  may  be  said,  that,  by  bestowing 
large  salaries  upon  the  officers  of  government,  we  pre- 
sent temptations  to  avarice.  But,  I  reply,  the  reduction 
of  salaries,  by  no  means  diminishes  the  evil.  Were 
emolument  to  be  reduced,  there  would  always  be  a  con- 


EXPENSES  FOR  EDUCATION.  399 

test  for  office.  The  only  question  then  is,  whether  we 
shall  have  the  contest  between  men  of  high  or  between 
men  of  low  character  ;  between  those  who  are  capable 
of  serving  us  to  our  advantage^  or  those  who  are  only 
capable  of  serving  us  to  our  disadvantage.  Were  the 
most  important  trusts  in  the  government  to  command  no 
higher  salaries  than  the  wages  of  day  laborers,  there 
would  be  as  great  competition  for  them  as  at  present  ; 
only,  then,  the  contest  would  b(j  between  day  laborers, 
instead  of  being  between  men  of  professional  ability. 

Here,  however,  I  am  willing  to  allow  that  the  princi- 
ples of  wages  formerly  illustrated,  should  have  their  full 
effect.  For  instance,  where  an  office  confers  rank,  or 
dignity,  or  indicates  professional  eminence,  the  emolu- 
ment should  be  less  than  would  otherwise  be  paid  for  the 
same  amount  of  service.  Again  :  when  an  office  is  per- 
manent, the  emolument  should  be  less  than  when  it  is 
temporary.  But,  on  the  other  hand,  if  it  be  insisted 
upon,  that  neither  rank  nor  consideration  shall  be  allowed 
to  the  public  officer,  but  that  all  men  are  and  must  show 
themselves  to  be,  on  a  level  ;  the  remuneration  of  office 
should  be  higher.  And  also,  when  an  office  is  tempo- 
rary, and  the  having  held  it,  disenables  the  incumbent 
for  subsequent  professional  employment,  the  remunera- 
tion should  rise  accordingly.  In  such  cases,  a  pension 
should  be  attached  to  the  office,  if  its  duties,  for  a  ^iven 
time,  have  been  faithfully  discharged. 

II.    Of  expenses  for  the  purpose  of  education. 

1 .  Education  is  of  two  kinds,  common  and  scientific. 
Common  education,  is  limited  to  the  teaching  of  those 
tiranches  of  which  a  knowledge  is  necessary  in  the  pur- 
suit of  the  ordinary  occupations  of  life.  This  is  8 
proper  object  for  national  expenditure,  because  it  is  for 
(he  interest  of  every  man,  that  every  other  man  should 
be  acquainted  with  the  elements  of  learning.  Specially 
is  this  tlie  case  in  a  representative  government. 

A   question,  however,  occurs,  both  as  to  the  manner 
in  which  such  a  revenue  should  be  raised,  and  the  man 
ner  in  which   it  should  be  distributed.      It  may,  for  in 
stance,  be  raised  like  any  other  tax,  and  paid  into  the 


400         EXPENSES  FOR  EDUCATION. 

public  chest,  and  the  teachers  be  paid  as  ufficers  of  the 
government.  Or,  it  may  be  raised  in  the  different  dis- 
tricts in  which  the  schools  are  to  be  supported,  and  paid 
into  the  hands  of  district  officers,  who  both  oversee  ihe 
schools  and  employ  the  teachers.  The  latter  seems  to 
be  the  preferable  method.  In  this  manner,  there  will  be 
by  far  the  most  lively  interest  maintained  in  behalf  of  the 
schools,  the  appropriation  of  money  will  be  more  vigi- 
lantly guarded,  and  the  teachers  will  more  probably  be 
appointed  on  account  of  their  skill  and  ability.  The 
appointment  of  so  many  teachers  could  rarely  be  effected 
by  a  central  government,  with  either  skill  or  fidelity. 
And  the  community,  having  no  interest  either  in  the  se- 
lection or  the  remuneration  of  the  teacher,  would  rarely 
take  that  interest  in  the  subject  of  education,  which  the 
good  of  the  pupils  requires. 

On  this  subject,  the  principles  to  be  kept  in  view  seem 
to  be  simple.  It  seems  necessary,  that  every  district 
sufficiently  large  to  maintain  a  school,  should  be  obliged 
to  maintain  one,  and  that,  for  this  purpose,  the  necessary 
funds  be  raised  by  the  authority  of  the  public.  When, 
however,  these  funds  have  been  raised,  they  may  safely 
be  left  in  the  power  of  each  district  itself,  in  the  belief, 
that  those  who  have  themselves  earned  and  contributed 
the  money,  will  be  more  likely  than  any  other  persons, 
to  disburse  it  skilfully  and  economically.  Besides  this, 
as  upon  such  a  system,  teachers  will  be  wanted  in  large 
numbers,  it  may  be  desirable  that  seminaries  be  estab- 
lished for  the  special  purpose  of  educating  them.  This 
will  give  uniformity  to  the  system  of  instruction,  and 
enable  the  science  of  education,  throughout  a  whole 
community,  the  more  easily  to  keep  pace  with  the  pro- 
gress of  science,  in  other  departments  of  knowledge. 

2.   Of  scientific  education. 

That  the  cultivation  and  the  diffusion  of  science  is 
greatly  advantageous  to  a  whole  community,  does  not,  1 
trust,  require  proof.  Nations  are,  at  present,  princi- 
pally enriched  by  the  result  of  discovery  and  invention  ; 
and  in  consequence  of  the  general  diffusion  of  knowledge 
and  intelligence.     That  a  portion  of  the  national  revenue 


EXPENSES  FOR  EDUCATION.  401 

should  fce  directed  to  the  promotion  of  these  objects, 
seems  both  equitable  and  wise. 

As  both  the  cultivalion  and  the  diffusion  of  science 
may  be  performed  by  the  same  individuals,  and,  as  the 
same  instruments  are  needful  for  both  purposes,  these 
two  (jbjects  have  been  commonly  united.  The  design 
of  an  establishment  for  scientific  education  is  two  fold. 
1st.  To  diffuse  abroad  the  knowledge  already  existing, 
and  2dly,  to  add  to  the  amount  of  knowledge  that  nov/ 
actually  exists.  Seminaries  of  learning  have  rarely  beeii 
successful  in  accomplishing  either  one  of  these  objects, 
when  they  were  not  also  successful  in  accomplishing  the 
other.  The  only  question  to  be  considered  here,  is 
this  ;  in  what  manner,  at  the  least  expense,  may  a  gov- 
ernment promote  the  cultivation  and  dift'usion  of  science, 
by  means  of  seminaries  of  higher  education. 

1 .  I  have  remarked,  when  treating  of  production,  ti^t 
the  instruments,  the  books,  and  the  buildings  necessary 
for  the  accomplishment  of  these  objects,  are  very  ex- 
pensive, and  van  rarely  be  possessed  by  individuals 
Or,  if  they  were  possessed  by  individuals,  the  cost  o( 
the  investment  would  render  education  so  expensive,  as 
to  restrict  it  entirely  to  the  rich.  Hence,  we  see  thai 
public  provision  for  scientific  education,  instead  of  ben- 
efiting the  wealthy,  is,  specially,  a  benefit  to  the  poor. 
The  furnishing  of  these  means,  is  the  most  important 
duty  of  a  government,  in  so  far  as  scientific  education  is 
concerned. 

2.  Whether  teachers  should  pay  for  the  use  of  such 
means,  may  be  easily  decided.  If  they  pay  for  such 
use,  they  must  charge  a  proportionally  higher  price  for 
tuition.  If  they  have  the  use  for  nothing,  their  charges 
for  tuition  will  fall  in  proportion. 

3.  The  emolument  of  the  teacher  should  be  made  to 
depend  upon  his  professional  skill  and  ability.  In  no 
other  manner  will  the  necessary  stimulants  be  presented 
to  professional  industry  ;  and  in  no  other  way  will  it  be 
rendered  impossible  for  a  man  to  support  himself  in  thi? 
profession,  without  performing  its  duties  with  skill  and 
Gdelit) .     1  have  no  doubt  that  the  mode,  in  this  conn- 

34* 


402  EXPENSES  FOR  EDUCATION. 

try,  of  remunerating  all  college  officers  by  a  fixed  salary, 
is  exceedingly  unfavorable  to  the  progress  of  education. 
If,  for  the  sake  of  promoting  the  study  of  a  particular 
science,  funds  be  provided  for  the  partial  support  of  an 
instructor,  they  should  always  be  so  managed,  as  not  in 
any  manner  to  conflict  with  the  principle  here  advanced. 
4.  If,  in  addition  to  this,  funds  be  provided  for  the 
education  of  a  certain  number  of  those  who  are  indigent, 
1  think  this  should  be  done  upon  the  following  piin* 
piples  :  — 

1 .  The  provision  should  be  so  made,  as  to  benefit 
merely  the  indigent,  and  not  reduce  the  price  of  tuition 
to  the  whole.  If  tuition  be  so  expensive  that  A  cannot 
procure  it,  and  it  be  desirable  to  educate  him,  it  may  be 
well  to  make  provision  for  him.  But  this  is  no  reason 
why  the  price  of  tuition  should  be  reduced,  in  an  equal 
degree,  for  B,  C,  D,  and  the  rest  of  the  community, 
who  are  able  to  pay  for  it  at  its  natural  cost. 

2.  The  provision  should  be  so  made  as  not  to  inter- 
fere with  the  principle  above  advanced,  that  teachers  be 
rewarded  according  to  their  skill  and  fidelity.  If  it  be 
so  made  that  a  college,  on  account  of  its  cheapness,  will 
always  be  full,  and  its  officers  be  paid,  whether  they 
perform  their  duties  or  not,  it  will  retard,  initead  of 
promoting,  the  cause  of  education. 

3.  It  might  be  of  advantage,  supposing  a  series  of 
schools  were  established,  if  gratuitous  admission  to  the 
higher  seminaries  were  the  reward  of  talent,  diligence, 
and  good  conduct  in  the  lower.  This  would  be  a  strong 
stimulant  to  effiart  in  the  lower  schools,  and  would  be 
more  likely  than  any  other  mode,  to  limit  the  bounty  of 
the  public  to  those  who  are  the  most  deserving  of  it. 

It  may  not  be  amiss  here  to  add,  that  the  success  of 
public  efforts  for  the  purpose  of  promoting  scientific 
education,  will  depend  very  greatly  upon  the  mode  in 
which  those  efforts  are  exerted.  If  they  be  directed  to 
the  single  object  of  reducing  the  cost  of  educaticn, 
nothing  but  this  object  will  be  effected.  Pupils  will  pay 
the  smallest  possible  sum  for  tuition,  and  the  instructors 
will  receive  the  smallest  possible  remuneration  for  their 


RELIGIOUS     ESTABLISHMENTS.  403 

sei  vices,  and  their  services  will  be  of  the  smallest  possi 
ble  value.  A  man  would  be  considered  very  simple, 
who  flattered  himself  that  he  could  purchase  twenty-five 
dollars'  worth  of  broadcloth,  or  flour,  or  coffee,  for  five 
dollars.  Let  him  please  himself  with  his  own  fancies  as 
he  may,  it  will  be  found  in  the  end,  that  for  five  dollars, 
he  has  received  no  more  than  five  dollars'  worth.  The 
case  is  the  same  with  education.  Men  may  have  teach- 
ers worth  five  hundred,  or  one  thousand,  or  two  thousand, 
or  three  thousand  dollars  per  annum.  But  they  will 
greatly  mistake,  if  they  suppose,  that,  by  any  process  yet 
discovered,  services  worth  three  thousand  dollars  can  be 
procured  for  five  hundred  dollars. 

By  merely  reducing  the  cost,  education  will  decrease 
in  quality  as  it  increases  in  quantity.  As  the  article  is 
found  to  be  less  valuable,  it  will,  in  the  end,  be  less  in 
demand  ;  and  thus,  at  last,  not  merely  will  the  quality 
have  deteriorated,  but  the  qtumtity  produced  will  also 
have  diminished. 

On  the  other  hand,  if  4he  efforts  of  the  public  be  di- 
rected to  improvement  of  education^  the  increased  value 
of  an  education  will  induce  a  greater  number  to  avail 
themselves  of  its  advantages.  The  literary  taste  of  the 
community  will  be  elevated;  the  demand  for  education 
will  increase,  and  thus,  not  only  will  the  quality  of  the 
product  be  improved,  but  ihe  amount  disposed  of  wilJ 
be  greatly  augmented.  If  these  views  be  correct,  it 
will  follow,  that  the  efforts  in  behalf  of  a  collegiate  edu- 
cation in  this  country,  have  not  always  been  wisely  di- 
rected, and  that,  if  much  that  has  been  done  to  render 
education  cheap,  had  been  done  to  render  education 
good,  it  would  have  been  far  better  for  the  cause  of 
science   and  of  professional  learning  /imong  us. 

III.    Of  expenses  for  maintaining  religious  tDorship 

These  expenses  need  to  be  borne  by  men  in  some 
mannen  associated  together.  It,  however,  by  no  means 
follows,  that  they  are  to  be  borne  by  men  as  members 
•)f  civil  society.  It  cannot  be  proved  that  the  Christian 
religion  needs  the  support  of  civil  government,  since  it 
has  existed  and  flrjurished  when  entirely  deprived  of  this 


404  OF    NATIONAL    IMPROVEMENT. 

support.  And,  if  it  be  said,  that  every  mfin  derives 
benefit  from  religious  services,  inasmuch  as  these  ser- 
vices improve  the  moral  and  intellectual  character  of  his 
neighbors  ;  and  hence,  that  every  man  ought  to  pay  for 
their  maintenance  ;  the  argument  may  be  easily  met  as 
follows.  It  is  granted,  that  every  man  is  benefited  by 
the  regular  administration  of  the  ordinances  of  religion, 
but  this  is  not  the  reason  for  which  these  ordinances  are 
esiablished.  Men  unite  with  their  neighbors  to  procure 
religious  instruction,  for  their  own  benefit,  and  not  for 
the  benefit  of  others.  If  it  happen,  accidentally,  that 
others  are  benefited,  it  does  not  follow  that  they  are 
obliged  to  pay  for  this  benefit.  If  my  neighbor  erect  a 
building  for  his  own  profit,  on  his  own  land,  and  thus 
improve  my  property,  I  am  not  obliged  to  unite  in  de- 
fraying the  expenses  of  his  building.  I  am  entitled  gra- 
tuitously to  this  accidental  advantage.  I  think  the  same 
principle  applies  to  the  case  in  question. 

The  only  ground  on  which  the  support  of  religion  by 
public  taxation,  can  be  defended,  is,  that  its  existence  is 
necessary  to  the  support  of  civil  government,  and  that  it 
can  be  sustained  in  no  other  manner  than  by  compulsion. 
The  fir'st  assertion  we  grant  to  be  true.  The  second, 
we  utterly  deny.  Hence,  we  do  not  believe  that  any 
taxation  for  this  purpose  is  necessary.  All  that  religious 
societies  have  a  right  to  ask  of  the  civil  government,  is, 
the  same  privileges  for  transacting  their  own  affairs, 
which  societies  of  every  other  sort  possess.  This,  they 
have  a  right  to  demand,  not  because  they  are  religious 
societies,  but,  because  the  exercise  of  religion  is  an  in- 
nocent mode  of  pursuing  happiness.  If  these  be  not 
granted,  religious  men  are  oppressed,  and  the  country 
where  such  oppression  prevails,  let  it  call  itself  what  it 
may,  is  not  in  this  matter  free. 

IV.    Of  national  improvement. 

Another  purpose,  for  which  the  public  funds  are  fre- 
quently expended,  is  national  imprcA^ement.  The  prin- 
ciples which  seem  to  apply  to  this  case,  have  been  al- 
ready stated.  They  are  briefly  these.  Improvements 
of  coasts,  and  harbors,  and  all  that  is  necessary  for  the 


OF    THE    EXPENSES    OF    PAUPt:  KISM.  405 

security  of  external  commerce,  must  be  done  by  th& 
public.  Internal  in)provemenls,  such  as  roads,  canals, 
railroads,  &c.,  may,  in  general,  be  safely  left  to  individ- 
ual enterprise.  If  they  would  be  a  profitable  investment 
of  capital,  individuals  would  be  willing  to  undertake 
them.  If  they  would  be  an  unprofitable  investment, 
both  parties  had  better  let  them  alone.  The  only  caie 
in  which  a  government  should  assume  such  woiks,  is 
that  in  which  their  magnitude  is  too  great  for  individual 
enterprise,  or  that  in  which  the  power  which  they  con- 
fer, is  too  great  to  be  entrusted  to  private  corporations. 
Whenever  they  are  undertaken,  the  principles  on  which 
the  expenditure  should  be  made,  are  the  same  as  those 
which  govern  the  expenditure  of  individuals. 

V.    Of  the  expenses  of  pauperism. 

To  relieve  the  sick,  the  destitute,  and  the  helpless,  is 
a  religious  duty,  and  therefore  should,  like  every  other 
religious  duty,  be  a  voluntary  service.  Hence,  charity 
in  a  moral  and  religious  community,  should  generally  be 
dispensed  by  individuals  from  their  own  resources,  or 
from  the  resources  of  voluntary  associations. 

Nevertheless,  as  cases  frequently  occur  which  could 
not,  with  sufficient  promptness,  be  relieved  by  the  aid 
of  individuals,  or  in  which  the  burden  would  press  too 
heavily  on  the  most  charitable,  it  may  be  proper  thai 
some  public  provision  should  be  made  for  the  relief  of 
those  whom  old  age,  or  infancy,  or  sickness,  has  de- 
prived of  the  power  of  providing  the  means  necessary 
for  sustenance. 

By  far  the  greater  number  of  persons  requiring  such 
aid,  are,  however,  capable  of  some  labor,  and  are  also 
possessed  of  some  skill.  They  are  also  far  happier, 
when  engaged  in  suitable  labor,  than  when  idle.  It  is, 
therefore,  the  dictate  of  benevolence,  as  well  as  of  econ 
c»my,  to  provide  them  with  means  of  profitable  occu- 
pation. This  labor  and  skill,  if  judiciously  employed 
upon  capital,  will  commonly  defray  the  expenses  of  the 
support  of  paupers.  Hence,  the  best  method  of  reliev- 
ing the  poor,  is  to  provide  some  establishment  furnished 
with  sufficient  capital,  in  which,  all  the  poor  who  need 


406  OF    WAR. 

assistance,  may  be  employed  and  supported.  In  many 
cases  in  New.  England  and  New  Yoik,  farms  have  been 
purchased  by  towns  or  by  counMes,  for  this  purpose 
It  has  generally  been  found,  that  the  only  expense  ne- 
cessary to  be  incurred,  is  the  purchase  of  the  farm,  or 
the  first  investment  of  the  capital  -The  establishment, 
after  this,  under  judicious  management,  has  generally 
paid  ts  own  expenses,  and,  in  some  cases,  as  I  have 
been  informed,  has  even  yielded  a  revenue  to  the  public. 
The  expenses  of  pauperism,  if  tiiey  be  defrayed  in  this 
manner,  must,  of  necessity,  be  very  moderate  ;  while  a 
competent  and  convenient  provision  may  be  made,  for 
every  individual  who  actually  deserves  assistance. 
^VI.  0/  War. 
The  cheapest  defence  of  nations,  I  suppose  to  be  tho 
exercise  of  justice  and  benevolence.  If,  however,  a 
nation  resolve  upon  the  employment  of  military  force, 
economy  would  direct  that  both  its  plans  and  means  of 
defence,  should  be  extensive,  scientific,  and  complete. 
Its  territory  and  its  coasts  should  be  accurately  sur- 
veyed with  reference  to  this  objec^.  Its  assailable  posi- 
tions should  all  be  strongly  fortified.  Munitions  of  war 
should  be  provided  in  abundance.  Schools  for  instruc- 
tion in  the  art  of  war,  should  be  supported  at  the  public 
expense,  and  the  persons  so  educated  should  be  main- 
tained, either  in  whole  or  in  part,  at  the  public  expense, 
so  that  their  services  may  be  commanded,  whenever 
they  may  be  required.  In  this,  as  in  every  other  case, 
economy  teaches  us,  that  if  a  given  object  is  to  be  ef- 
fected, no  expense  is  unreasonable,  which  is  necessary 
to  effect  it  in  the  most  perfect  manner.  The  manner 
of  expenditure  is  to  be  learnred  from  the  teachers  of  mil- 
itary science  Economy,  therefore,  directs  that  the 
most  valuable  talent  should  be  employed,  at  whatever 
expense,  for  providing  the  plans  of  defence,  that  these 
plans  should  be  fully  and  perfectly  carried  into  effect, 
and  that  all  should  be  done  at  no  greater  cost  than  is 
necessary  to  the  accomplishment  of  the  object. 


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a  gradual  introduction  to  the  first  principles  of  composition.  The  plan  pursued  in  these  exercises, 
oa  in  the  Grammar,  is  founded  on  the  application  of  the  principle  of  imitation.  The  pupil  is  con- 
ducted progressively  from  the  simplest  expression  of  thought  to  the  practice  of  connected  compo- 
sition. 

BLAKE'S  NATUBAL  PHILOSOPHY;  being  Conversations  on  Philosophy, 
with  Explanatory  Notes,  Questions  for  Examination,  and  a  Dictionary  of  Philosophical 
Terms.     With  twenty-eight  Steel  Engrarings.     By  J.  L.  Blaeb,  D.  D.    Sheep,  67  cts. 

Perhaps  no  work  has  contributed  so  much  as  this  to  excite  a  fondness  for  the  study  of  Xatural 
Philosophy  in  youthfkil  minds.  The  familiar  comparisons  with  which  it  abounds  awaken  interest 
and  rivet  the  attention  of  the  pupil. 

BLAKE'S   PIBST  BOOK  IN  ASTBONOMY;  designea  for  the  use  of 

Common  Schools.    Illust.  with  steel-plate  Engravings.    By  J.  L.  Blake,  D.  D.    Cloth 
back,  50  cts. 

"  I  know  of  no  other  work  so  well  calculated  to  Interest  and  instruct  younir  learners  in  this 
sublime  science."  — Barnuu  Field,  Boston. 

THE  CICEBONTAN ;  or,  the  Prussian  method  of  teaching  the  elements  of  the 
Latin  Language.  Adapted  to  the  'use  of  American  Schools.  By  ProL  Barnas  Sears, 
President  of  Brown  University.    ISmo,  half  mor.,  50  cts. 

MEMOBIA  TECHNICA ;  or,  the  Art  of  Abbreviating  those  Studies  which  give 
the  greatest  labor  to  the  memory.    By  L.  D.  JoHNaoN.    Half  bound,  50  cts. 

"WBITING  COPIES,  Plain  and  Ornamental,  from  the  "Progressive  Penman- 
ship," bound  in  one  Book,  16|  cts. 

PBOGBESSIVE  PENMANSHIP,  Plain  and  Ornamental,  for  the  ose  of 
Schools.  By  N.  D.  Gould,  Author  of  "Beautits  of  Writing,"  "  Writing  Master's  Assist- 
ant," &c.    In  five  parts,  each  12i  cts. 

The  copies  are  arranged  in  progressive  series,  and  are  Tikewise  so  diveraifled  by  the  Introduction 
of  variations  in  style  as  to  command  the  constant  atb-ntion  and  exercise  the  ingenuity  of  the  learner. 
Tlipy  are  divided  into  five  series,  intended  for  the  like  number  of  books,  and  are  so  arranged  and^ 
folded  that  a  copy  always  comes  over  the  top  of  the  pa<;e  on  which  it  is  to  be  written. 

There  are  ninety-six  copies,  presenting  a  regular  inductive  system  of  Penmanship  for  ordinary 
b-isiness  purposes,  followed  by  examples  of  every  variety  of  Ornamental  Writing. 

Tliis  work  is  introduced  into  many  of  the  Boston  JPublic  and  Private  Schools,  and  gives  univer- 
sal sattsfKtlon.  (21) 


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